USC Chapter 43

in effect

26 U.S.C. § 4971 Taxes on failure to meet minimum funding standards

(a) Initial taxIf at any time during any taxable year an employer maintains a plan to which section 412 applies, there is hereby imposed for the taxable year a tax equal to—(1) in the case of a single-employer plan, 10 percent of the aggregate unpaid minimum required contributions for all plan years remaining unpaid as of the end of any plan year ending with or within the taxable year, (2) in the case of a multiemployer plan, 5 percent of the accumulated funding deficiency determined under section 431 as of the end of any plan year ending with or within the taxable year, and (3) in the case of a CSEC plan, 10 percent of the CSEC accumulated funding deficiency as of the end of the plan year ending with or within the taxable year. (b) Additional taxIf—(1) a tax is imposed under subsection (a)(1) on any unpaid minimum required contribution and such amount remains unpaid as of the close of the taxable period, (2) a tax is imposed under subsection (a)(2) on any accumulated funding deficiency and the accumulated funding deficiency is not corrected within the taxable period, or (3) a tax is imposed under subsection (a)(3) on any CSEC accumulated funding deficiency and the CSEC accumulated funding deficiency is not corrected within the taxable period, there is hereby imposed a tax equal to 100 percent of the unpaid minimum required contribution, accumulated funding deficiency, or CSEC accumulated funding deficiency, whichever is applicable, to the extent not so paid or corrected. (c) DefinitionsFor purposes of this section—(1) Accumulated funding deficiencyThe term “accumulated funding deficiency” has the meaning given to such term by section 431. (2) CorrectThe term “correct” means, with respect to an accumulated funding deficiency or CSEC accumulated funding deficiency, the contribution, to or under the plan, of the amount necessary to reduce such accumulated funding deficiency or CSEC accumulated funding deficiency as of the end of a plan year in which such deficiency arose to zero. (3) Taxable periodThe term “taxable period” means, with respect to an accumulated funding deficiency, CSEC accumulated funding deficiency, or unpaid minimum required contribution, whichever is applicable, the period beginning with the end of the plan year in which there is an accumulated funding deficiency, CSEC accumulated funding deficiency, or unpaid minimum required contribution, whichever is applicable, and ending on the earlier of—(A) the date of mailing of a notice of deficiency with respect to the tax imposed by subsection (a), or (B) the date on which the tax imposed by subsection (a) is assessed. (4) Unpaid minimum required contribution(A) In generalThe term “unpaid minimum required contribution” means, with respect to any plan year, any minimum required contribution under section 430 for the plan year which is not paid on or before the due date (as determined under section 430(j)(1)) for the plan year. (B) Ordering ruleAny payment to or under a plan for any plan year shall be allocated first to unpaid minimum required contributions for all preceding plan years on a first-in, first-out basis and then to the minimum required contribution under section 430 for the plan year. (5) CSEC accumulated funding deficiencyThe term “CSEC accumulated funding deficiency” means the accumulated funding deficiency determined under section 433. (d) Notification of the Secretary of LaborBefore issuing a notice of deficiency with respect to the tax imposed by subsection (a) or (b), the Secretary shall notify the Secretary of Labor and provide him a reasonable opportunity (but not more than 60 days)—(1) to require the employer responsible for contributing to or under the plan to eliminate the accumulated funding deficiency, CSEC accumulated funding deficiency, or unpaid minimum required contribution, whichever is applicable, or (2) to comment on the imposition of such tax. (e) Liability for tax(1) In generalExcept as provided in paragraph (2), the tax imposed by subsection (a), (b), or (f) shall be paid by the employer responsible for contributing to or under the plan the amount described in section 412(a)(2). (2) Joint and several liability where employer member of controlled group(A) In generalIf an employer referred to in paragraph (1) is a member of a controlled group, each member of such group shall be jointly and severally liable for the tax imposed by subsection (a), (b), (f), or (g). (B) Controlled groupFor purposes of subparagraph (A), the term “controlled group” means any group treated as a single employer under subsection (b), (c), (m), or (o) of section 414. (f) Failure to pay liquidity shortfall(1) In generalIn the case of a plan to which section 430(j)(4) or 433(f) applies, there is hereby imposed a tax of 10 percent of the excess (if any) of—(A) the amount of the liquidity shortfall for any quarter, over (B) the amount of such shortfall which is paid by the required installment under section 430(j) or 433(f), whichever is applicable, for such quarter (but only if such installment is paid on or before the due date for such installment). (2) Additional taxIf the plan has a liquidity shortfall as of the close of any quarter and as of the close of each of the following 4 quarters, there is hereby imposed a tax equal to 100 percent of the amount on which tax was imposed by paragraph (1) for such first quarter. (3) Definitions and special rule(A) Liquidity shortfall; quarterFor purposes of this subsection, the terms “liquidity shortfall” and “quarter” have the respective meanings given such terms by section 430(j) or 433(f), whichever is applicable. (B) Special ruleIf the tax imposed by paragraph (2) is paid with respect to any liquidity shortfall for any quarter, no further tax shall be imposed by this subsection on such shortfall for such quarter. (4) Waiver by SecretaryIf the taxpayer establishes to the satisfaction of the Secretary that—(A) the liquidity shortfall described in paragraph (1) was due to reasonable cause and not willful neglect, and (B) reasonable steps have been taken to remedy such liquidity shortfall, the Secretary may waive all or part of the tax imposed by this subsection. (g) Multiemployer plans in endangered or critical status(1) In generalExcept as provided in this subsection—(A) no tax shall be imposed under this section for a taxable year with respect to a multiemployer plan if, for the plan years ending with or within the taxable year, the plan is in critical status pursuant to section 432, and (B) any tax imposed under this subsection for a taxable year with respect to a multiemployer plan if, for the plan years ending with or within the taxable year, the plan is in endangered status pursuant to section 432 shall be in addition to any other tax imposed by this section. (2) Failure to comply with funding improvement or rehabilitation plan(A) In generalIf any funding improvement plan or rehabilitation plan in effect under section 432 with respect to a multiemployer plan requires an employer to make a contribution to the plan, there is hereby imposed a tax on each failure of the employer to make the required contribution within the time required under such plan. (B) Amount of taxThe amount of the tax imposed by subparagraph (A) shall be equal to the amount of the required contribution the employer failed to make in a timely manner. (C) Liability for taxThe tax imposed by subparagraph (A) shall be paid by the employer responsible for contributing to or under the rehabilitation plan which fails to make the contribution. (3) Failure to meet requirements for plans in endangered or critical statusIf—(A) a plan which is in seriously endangered status fails to meet the applicable benchmarks by the end of the funding improvement period, or (B) a plan which is in critical status either—(i) fails to meet the requirements of section 432(e) by the end of the rehabilitation period, or (ii) has received a certification under section 432(b)(3)(A)(ii) for 3 consecutive plan years that the plan is not making the scheduled progress in meeting its requirements under the rehabilitation plan, the plan shall be treated as having an accumulated funding deficiency for purposes of this section for the last plan year in such funding improvement, rehabilitation, or 3-consecutive year period (and each succeeding plan year until such benchmarks or requirements are met) in an amount equal to the greater of the amount of the contributions necessary to meet such benchmarks or requirements or the amount of such accumulated funding deficiency without regard to this paragraph. (4) Failure to adopt rehabilitation plan(A) In generalIn the case of a multiemployer plan which is in critical status, there is hereby imposed a tax on the failure of such plan to adopt a rehabilitation plan within the time prescribed under section 432. (B) Amount of taxThe amount of the tax imposed under subparagraph (A) with respect to any plan sponsor for any taxable year shall be the greater of—(i) the amount of tax imposed under subsection (a) for the taxable year (determined without regard to this subsection), or (ii) the amount equal to $1,100 multiplied by the number of days during the taxable year which are included in the period beginning on the day following the close of the 240-day period described in section 432(e)(1)(A) and ending on the day on which the rehabilitation plan is adopted. (C) Liability for tax(i) In generalThe tax imposed by subparagraph (A) shall be paid by each plan sponsor. (ii) Plan sponsorFor purposes of clause (i), the term “plan sponsor” has the meaning given such term by section 432(j)(9). (5) WaiverIn the case of a failure described in paragraph (2) or (3) which is due to reasonable cause and not to willful neglect, the Secretary may waive part or all of the tax imposed by this subsection. For purposes of this paragraph, reasonable cause includes unanticipated and material market fluctuations, the loss of a significant contributing employer, or other factors to the extent that the payment of tax under this subsection with respect to the failure would be excessive or otherwise inequitable relative to the failure involved. (6) Terms used in section 432For purposes of this subsection, any term used in this subsection which is also used in section 432 shall have the meaning given such term by section 432. (h) Failure of a CSEC plan sponsor to adopt funding restoration plan(1) In generalIn the case of a CSEC plan that is in funding restoration status (within the meaning of section 433(j)(5)(A)), there is hereby imposed a tax on the failure of such plan to adopt a funding restoration plan within the time prescribed under section 433(j)(3). (2) Amount of taxThe amount of the tax imposed under paragraph (1) with respect to any plan sponsor for any taxable year shall be the amount equal to $100 multiplied by the number of days during the taxable year which are included in the period beginning on the day following the close of the 180-day period described in section 433(j)(3) and ending on the day on which the funding restoration plan is adopted. (3) Waiver by SecretaryIn the case of a failure described in paragraph (1) which the Secretary determines is due to reasonable cause and not to willful neglect, the Secretary may waive a portion or all of the tax imposed by such paragraph. (4) Liability for taxThe tax imposed by paragraph (1) shall be paid by the plan sponsor (within the meaning of section 433(j)(5)(E)). (i) Cross referencesFor disallowance of deduction for taxes paid under this section, see section 275. For liability for tax in case of an employer party to collective bargaining agreement, see section 413(b)(6). For provisions concerning notification of Secretary of Labor of imposition of tax under this section, waiver of the tax imposed by subsection (b), and other coordination between Secretary of the Treasury and Secretary of Labor with respect to compliance with this section, see section 3002(b) of title III of the Employee Retirement Income Security Act of 1974.

26 U.S.C. § 4972 Tax on nondeductible contributions to qualified employer plans

(a) Tax imposedIn the case of any qualified employer plan, there is hereby imposed a tax equal to 10 percent of the nondeductible contributions under the plan (determined as of the close of the taxable year of the employer). (b) Employer liable for taxThe tax imposed by this section shall be paid by the employer making the contributions. (c) Nondeductible contributionsFor purposes of this section—(1) In generalThe term “nondeductible contributions” means, with respect to any qualified employer plan, the sum of—(A) the excess (if any) of—(i) the amount contributed for the taxable year by the employer to or under such plan, over (ii) the amount allowable as a deduction under section 404 for such contributions (determined without regard to subsection (e) thereof), and (B) the amount determined under this subsection for the preceding taxable year reduced by the sum of—(i) the portion of the amount so determined returned to the employer during the taxable year, and (ii) the portion of the amount so determined deductible under section 404 for the taxable year (determined without regard to subsection (e) thereof). (2) Ordering rule for section 404For purposes of paragraph (1), the amount allowable as a deduction under section 404 for any taxable year shall be treated as—(A) first from carryforwards to such taxable year from preceding taxable years (in order of time), and (B) then from contributions made during such taxable year. (3) Contributions which may be returned to employerIn determining the amount of nondeductible contributions for any taxable year, there shall not be taken into account any contribution for such taxable year which is distributed to the employer in a distribution described in section 4980(c)(2)(B)(ii) if such distribution is made on or before the last day on which a contribution may be made for such taxable year under section 404(a)(6). (4) Special rule for self-employed individualsFor purposes of paragraph (1), if—(A) the amount which is required to be contributed to a plan under section 412 on behalf of an individual who is an employee (within the meaning of section 401(c)(1)), exceeds (B) the earned income (within the meaning of section 404(a)(8)) of such individual derived from the trade or business with respect to which such plan is established, such excess shall be treated as an amount allowable as a deduction under section 404. (5) Pre-1987 contributionsThe term “nondeductible contribution” shall not include any contribution made for a taxable year beginning before January 1, 1987. (6) ExceptionsIn determining the amount of nondeductible contributions for any taxable year, there shall not be taken into account—(A) so much of the contributions to 1 or more defined contribution plans which are not deductible when contributed solely because of section 404(a)(7) as does not exceed the amount of contributions described in section 401(m)(4)(A), or (B) so much of the contributions to a simple retirement account (within the meaning of section 408(p)), a simple plan (within the meaning of section 401(k)(11)), or a simplified employee pension (within the meaning of section 408(k)) which are not deductible when contributed solely because such contributions are not made in connection with a trade or business of the employer. For purposes of subparagraph (A), the deductible limits under section 404(a)(7) shall first be applied to amounts contributed to a defined benefit plan and then to amounts described in subparagraph (A). Subparagraph (B) shall not apply to contributions made on behalf of the employer or a member of the employer’s family (as defined in section 447(e)(1)).11 See References in Text note below. (7) Defined benefit plan exceptionIn determining the amount of nondeductible contributions for any taxable year, an employer may elect for such year not to take into account any contributions to a defined benefit plan except, in the case of a multiemployer plan, to the extent that such contributions exceed the full-funding limitation (as defined in section 431(c)(6)). For purposes of this paragraph, the deductible limits under section 404(a)(7) shall first be applied to amounts contributed to defined contribution plans and then to amounts described in this paragraph. If an employer makes an election under this paragraph for a taxable year, paragraph (6) shall not apply to such employer for such taxable year. (d) DefinitionsFor purposes of this section—(1) Qualified employer plan(A) In generalThe term “qualified employer plan” means—(i) any plan meeting the requirements of section 401(a) which includes a trust exempt from tax under section 501(a), (ii) an annuity plan described in section 403(a), (iii) any simplified employee pension (within the meaning of section 408(k)), and (iv) any simple retirement account (within the meaning of section 408(p)). (B) Exemption for governmental and tax exempt plansThe term “qualified employer plan” does not include a plan described in subparagraph (A) or (B) of section 4980(c)(1). (2) EmployerIn the case of a plan which provides contributions or benefits for employees some or all of whom are self-employed individuals within the meaning of section 401(c)(1), the term “employer” means the person treated as the employer under section 401(c)(4).

26 U.S.C. § 4973 Tax on excess contributions to certain tax-favored accounts and annuities

(a) Tax imposedIn the case of—(1) an individual retirement account (within the meaning of section 408(a)), (2) an Archer MSA (within the meaning of section 220(d)), (3) an individual retirement annuity (within the meaning of section 408(b)), a custodial account treated as an annuity contract under section 403(b)(7)(A) (relating to custodial accounts for regulated investment company stock), (4) a Coverdell education savings account (as defined in section 530), (5) a health savings account (within the meaning of section 223(d)), or (6) an ABLE account (within the meaning of section 529A), there is imposed for each taxable year a tax in an amount equal to 6 percent of the amount of the excess contributions to such individual’s accounts or annuities (determined as of the close of the taxable year). The amount of such tax for any taxable year shall not exceed 6 percent of the value of the account or annuity (determined as of the close of the taxable year). In the case of an endowment contract described in section 408(b), the tax imposed by this section does not apply to any amount allocable to life, health, accident, or other insurance under such contract. The tax imposed by this subsection shall be paid by such individual. (b) Excess contributionsFor purposes of this section, in the case of individual retirement accounts or individual retirement annuities, the term “excess contributions” means the sum of—(1) the excess (if any) of—(A) the amount contributed for the taxable year to the accounts or for the annuities (other than a contribution to a Roth IRA or a rollover contribution described in section 402(c), 403(a)(4), 403(b)(8), 408(d)(3), or 457(e)(16)), over (B) the amount allowable as a deduction under section 219 for such contributions, and (2) the amount determined under this subsection for the preceding taxable year reduced by the sum of—(A) the distributions out of the account for the taxable year which were included in the gross income of the payee under section 408(d)(1), (B) the distributions out of the account for the taxable year to which section 408(d)(5) applies, and (C) the excess (if any) of the maximum amount allowable as a deduction under section 219 for the taxable year over the amount contributed (determined without regard to section 219(f)(6)) to the accounts or for the annuities (including the amount contributed to a Roth IRA) for the taxable year. For purposes of this subsection, any contribution which is distributed from the individual retirement account or the individual retirement annuity in a distribution to which section 408(d)(4) applies shall be treated as an amount not contributed. For purposes of paragraphs (1)(B) and (2)(C), the amount allowable as a deduction under section 219 shall be computed without regard to section 219(g). Such term shall not include any designated nondeductible contribution (as defined in subparagraph (C) of section 408(o)(2)) which does not exceed the nondeductible limit under subparagraph (B) thereof by reason of an election under section 408(o)(5). (c) Section 403(b) contractsFor purposes of this section, in the case of a custodial account referred to in subsection (a)(3), the term “excess contributions” means the sum of—(1) the excess (if any) of the amount contributed for the taxable year to such account (other than a rollover contribution described in section 403(b)(8) or 408(d)(3)(A)(iii)), over the lesser of the amount excludable from gross income under section 403(b) or the amount permitted to be contributed under the limitations contained in section 415 (or under whichever such section is applicable, if only one is applicable), and (2) the amount determined under this subsection for the preceding taxable year, reduced by—(A) the excess (if any) of the lesser of (i) the amount excludable from gross income under section 403(b) or (ii) the amount permitted to be contributed under the limitations contained in section 415 over the amount contributed to the account for the taxable year (or under whichever such section is applicable, if only one is applicable), and (B) the sum of the distributions out of the account (for all prior taxable years) which are included in gross income under section 72(e). (d) Excess contributions to Archer MSAsFor purposes of this section, in the case of Archer MSAs (within the meaning of section 220(d)), the term “excess contributions” means the sum of—(1) the aggregate amount contributed for the taxable year to the accounts (other than rollover contributions described in section 220(f)(5)) which is neither excludable from gross income under section 106(b) nor allowable as a deduction under section 220 for such year, and (2) the amount determined under this subsection for the preceding taxable year, reduced by the sum of—(A) the distributions out of the accounts which were included in gross income under section 220(f)(2), and (B) the excess (if any) of—(i) the maximum amount allowable as a deduction under section 220(b)(1) (determined without regard to section 106(b)) for the taxable year, over (ii) the amount contributed to the accounts for the taxable year. For purposes of this subsection, any contribution which is distributed out of the Archer MSA in a distribution to which section 220(f)(3) or section 138(c)(3) applies shall be treated as an amount not contributed. (e) Excess contributions to Coverdell education savings accountsFor purposes of this section—(1) In generalIn the case of Coverdell education savings accounts maintained for the benefit of any one beneficiary, the term “excess contributions” means the sum of—(A) the amount by which the amount contributed for the taxable year to such accounts exceeds $2,000 (or, if less, the sum of the maximum amounts permitted to be contributed under section 530(c) by the contributors to such accounts for such year); and (B) the amount determined under this subsection for the preceding taxable year, reduced by the sum of—(i) the distributions out of the accounts for the taxable year (other than rollover distributions); and (ii) the excess (if any) of the maximum amount which may be contributed to the accounts for the taxable year over the amount contributed to the accounts for the taxable year. (2) Special rulesFor purposes of paragraph (1), the following contributions shall not be taken into account:(A) Any contribution which is distributed out of the Coverdell education savings account in a distribution to which section 530(d)(4)(C) applies. (B) Any rollover contribution. (f) Excess contributions to Roth IRAsFor purposes of this section, in the case of contributions to a Roth IRA (within the meaning of section 408A(b)), the term “excess contributions” means the sum of—(1) the excess (if any) of—(A) the amount contributed for the taxable year to Roth IRAs (other than a qualified rollover contribution described in section 408A(e)), over (B) the amount allowable as a contribution under sections 408A(c)(2) and (c)(3), and (2) the amount determined under this subsection for the preceding taxable year, reduced by the sum of—(A) the distributions out of the accounts for the taxable year, and (B) the excess (if any) of the maximum amount allowable as a contribution under sections 408A(c)(2) and (c)(3) for the taxable year over the amount contributed by the individual to all individual retirement plans for the taxable year. For purposes of this subsection, any contribution which is distributed from a Roth IRA in a distribution described in section 408(d)(4) shall be treated as an amount not contributed. (g) Excess contributions to health savings accountsFor purposes of this section, in the case of health savings accounts (within the meaning of section 223(d)), the term “excess contributions” means the sum of—(1) the aggregate amount contributed for the taxable year to the accounts (other than a rollover contribution described in section 220(f)(5) or 223(f)(5)) which is neither excludable from gross income under section 106(d) nor allowable as a deduction under section 223 for such year, and (2) the amount determined under this subsection for the preceding taxable year, reduced by the sum of—(A) the distributions out of the accounts which were included in gross income under section 223(f)(2), and (B) the excess (if any) of—(i) the maximum amount allowable as a deduction under section 223(b) (determined without regard to section 106(d)) for the taxable year, over (ii) the amount contributed to the accounts for the taxable year. For purposes of this subsection, any contribution which is distributed out of the health savings account in a distribution to which section 223(f)(3) applies shall be treated as an amount not contributed. (h) Excess contributions to ABLE accountFor purposes of this section—(1) In generalIn the case of an ABLE account (within the meaning of section 529A), the term “excess contributions” means the amount by which the amount contributed for the taxable year to such account (other than contributions under section 529A(c)(1)(C) or contributions received in a qualified ABLE rollover contribution described in section 530A(d)(4)(B)) exceeds the contribution limit under section 529A(b)(2)(B). (2) Special ruleFor purposes of this subsection, any contribution which is distributed out of the ABLE account in a distribution to which the last sentence of section 529A(b)(2) applies shall be treated as an amount not contributed.

26 U.S.C. § 4974 Excise tax on certain accumulations in qualified retirement plans

(a) General ruleIf the amount distributed during the taxable year of the payee under any qualified retirement plan or any eligible deferred compensation plan (as defined in section 457(b)) is less than the minimum required distribution for such taxable year, there is hereby imposed a tax equal to 25 percent of the amount by which such minimum required distribution exceeds the actual amount distributed during the taxable year. The tax imposed by this section shall be paid by the payee. (b) Minimum required distributionFor purposes of this section, the term “minimum required distribution” means the minimum amount required to be distributed during a taxable year under section 401(a)(9), 403(b)(10), 408(a)(6), 408(b)(3), or 457(d)(2), as the case may be, as determined under regulations prescribed by the Secretary. (c) Qualified retirement planFor purposes of this section, the term “qualified retirement plan” means—(1) a plan described in section 401(a) which includes a trust exempt from tax under section 501(a), (2) an annuity plan described in section 403(a), (3) an annuity contract described in section 403(b), (4) an individual retirement account described in section 408(a), or (5) an individual retirement annuity described in section 408(b). Such term includes any plan, contract, account, or annuity which, at any time, has been determined by the Secretary to be such a plan, contract, account, or annuity. (d) Waiver of tax in certain casesIf the taxpayer establishes to the satisfaction of the Secretary that—(1) the shortfall described in subsection (a) in the amount distributed during any taxable year was due to reasonable error, and (2) reasonable steps are being taken to remedy the shortfall, the Secretary may waive the tax imposed by subsection (a) for the taxable year. (e) Reduction of tax in certain cases(1) ReductionIn the case of a taxpayer who—(A) receives a distribution, during the correction window, of the amount which resulted in imposition of a tax under subsection (a) from the same plan to which such tax relates, and (B) submits a return, during the correction window, reflecting such tax (as modified by this subsection), the first sentence of subsection (a) shall be applied by substituting “10 percent” for “25 percent”. (2) Correction windowFor purposes of this subsection, the term “correction window” means the period of time beginning on the date on which the tax under subsection (a) is imposed with respect to a shortfall of distributions from a plan described in subsection (a), and ending on the earliest of—(A) the date of mailing a notice of deficiency with respect to the tax imposed by subsection (a) under section 6212, (B) the date on which the tax imposed by subsection (a) is assessed, or (C) the last day of the second taxable year that begins after the end of the taxable year in which the tax under subsection (a) is imposed.

26 U.S.C. § 4975 Tax on prohibited transactions

(a) Initial taxes on disqualified personThere is hereby imposed a tax on each prohibited transaction. The rate of tax shall be equal to 15 percent of the amount involved with respect to the prohibited transaction for each year (or part thereof) in the taxable period. The tax imposed by this subsection shall be paid by any disqualified person who participates in the prohibited transaction (other than a fiduciary acting only as such). (b) Additional taxes on disqualified personIn any case in which an initial tax is imposed by subsection (a) on a prohibited transaction and the transaction is not corrected within the taxable period, there is hereby imposed a tax equal to 100 percent of the amount involved. The tax imposed by this subsection shall be paid by any disqualified person who participated in the prohibited transaction (other than a fiduciary acting only as such). (c) Prohibited transaction(1) General ruleFor purposes of this section, the term “prohibited transaction” means any direct or indirect—(A) sale or exchange, or leasing, of any property between a plan and a disqualified person; (B) lending of money or other extension of credit between a plan and a disqualified person; (C) furnishing of goods, services, or facilities between a plan and a disqualified person; (D) transfer to, or use by or for the benefit of, a disqualified person of the income or assets of a plan; (E) act by a disqualified person who is a fiduciary whereby he deals with the income or assets of a plan in his own interest or for his own account; or (F) receipt of any consideration for his own personal account by any disqualified person who is a fiduciary from any party dealing with the plan in connection with a transaction involving the income or assets of the plan. (2) Special exemptionThe Secretary shall establish an exemption procedure for purposes of this subsection. Pursuant to such procedure, he may grant a conditional or unconditional exemption of any disqualified person or transaction, orders of disqualified persons or transactions, from all or part of the restrictions imposed by paragraph (1) of this subsection. Action under this subparagraph may be taken only after consultation and coordination with the Secretary of Labor. The Secretary may not grant an exemption under this paragraph unless he finds that such exemption is—(A) administratively feasible, (B) in the interests of the plan and of its participants and beneficiaries, and (C) protective of the rights of participants and beneficiaries of the plan. Before granting an exemption under this paragraph, the Secretary shall require adequate notice to be given to interested persons and shall publish notice in the Federal Register of the pendency of such exemption and shall afford interested persons an opportunity to present views. No exemption may be granted under this paragraph with respect to a transaction described in subparagraph (E) or (F) of paragraph (1) unless the Secretary affords an opportunity for a hearing and makes a determination on the record with respect to the findings required under subparagraphs (A), (B), and (C) of this paragraph, except that in lieu of such hearing the Secretary may accept any record made by the Secretary of Labor with respect to an application for exemption under section 408(a) of title I of the Employee Retirement Income Security Act of 1974. (3) Special rule for individual retirement accountsAn individual for whose benefit an individual retirement account is established and his beneficiaries shall be exempt from the tax imposed by this section with respect to any transaction concerning such account (which would otherwise be taxable under this section) if, with respect to such transaction, the account ceases to be an individual retirement account by reason of the application of section 408(e)(2)(A) or if section 408(e)(4) applies to such account. (4) Special rule for Archer MSAsAn individual for whose benefit an Archer MSA (within the meaning of section 220(d)) is established shall be exempt from the tax imposed by this section with respect to any transaction concerning such account (which would otherwise be taxable under this section) if section 220(e)(2) applies to such transaction. (5) Special rule for Coverdell education savings accountsAn individual for whose benefit a Coverdell education savings account is established and any contributor to such account shall be exempt from the tax imposed by this section with respect to any transaction concerning such account (which would otherwise be taxable under this section) if section 530(d) applies with respect to such transaction. (6) Special rule for health savings accountsAn individual for whose benefit a health savings account (within the meaning of section 223(d)) is established shall be exempt from the tax imposed by this section with respect to any transaction concerning such account (which would otherwise be taxable under this section) if, with respect to such transaction, the account ceases to be a health savings account by reason of the application of section 223(e)(2) to such account. (7) Special rule for provision of pharmacy benefit servicesAny party to an arrangement which satisfies the requirements of section 408(h) of the Employee Retirement Income Security Act of 1974 shall be exempt from the tax imposed by this section with respect to such arrangement. (d) ExemptionsExcept as provided in subsection (f)(6), the prohibitions provided in subsection (c) shall not apply to—(1) any loan made by the plan to a disqualified person who is a participant or beneficiary of the plan if such loan—(A) is available to all such participants or beneficiaries on a reasonably equivalent basis, (B) is not made available to highly compensated employees (within the meaning of section 414(q)) in an amount greater than the amount made available to other employees, (C) is made in accordance with specific provisions regarding such loans set forth in the plan, (D) bears a reasonable rate of interest, and (E) is adequately secured; (2) any contract, or reasonable arrangement, made with a disqualified person for office space, or legal, accounting, or other services necessary for the establishment or operation of the plan, if no more than reasonable compensation is paid therefor; (3) any loan to a leveraged employee stock ownership plan (as defined in subsection (e)(7)), if—(A) such loan is primarily for the benefit of participants and beneficiaries of the plan, and (B) such loan is at a reasonable rate of interest, and any collateral which is given to a disqualified person by the plan consists only of qualifying employer securities (as defined in subsection (e)(8)); (4) the investment of all or part of a plan’s assets in deposits which bear a reasonable interest rate in a bank or similar financial institution supervised by the United States or a State, if such bank or other institution is a fiduciary of such plan and if—(A) the plan covers only employees of such bank or other institution and employees of affiliates of such bank or other institution, or (B) such investment is expressly authorized by a provision of the plan or by a fiduciary (other than such bank or institution or affiliates thereof) who is expressly empowered by the plan to so instruct the trustee with respect to such investment; (5) any contract for life insurance, health insurance, or annuities with one or more insurers which are qualified to do business in a State if the plan pays no more than adequate consideration, and if each such insurer or insurers is—(A) the employer maintaining the plan, or (B) a disqualified person which is wholly owned (directly or indirectly) by the employer establishing the plan, or by any person which is a disqualified person with respect to the plan, but only if the total premiums and annuity considerations written by such insurers for life insurance, health insurance, or annuities for all plans (and their employers) with respect to which such insurers are disqualified persons (not including premiums or annuity considerations written by the employer maintaining the plan) do not exceed 5 percent of the total premiums and annuity considerations written for all lines of insurance in that year by such insurers (not including premiums or annuity considerations written by the employer maintaining the plan); (6) the provision of any ancillary service by a bank or similar financial institution supervised by the United States or a State, if such service is provided at not more than reasonable compensation, if such bank or other institution is a fiduciary of such plan, and if—(A) such bank or similar financial institution has adopted adequate internal safeguards which assure that the provision of such ancillary service is consistent with sound banking and financial practice, as determined by Federal or State supervisory authority, and (B) the extent to which such ancillary service is provided is subject to specific guidelines issued by such bank or similar financial institution (as determined by the Secretary after consultation with Federal and State supervisory authority), and under such guidelines the bank or similar financial institution does not provide such ancillary service—(i) in an excessive or unreasonable manner, and (ii) in a manner that would be inconsistent with the best interests of participants and beneficiaries of employee benefit plans; (7) the exercise of a privilege to convert securities, to the extent provided in regulations of the Secretary, but only if the plan receives no less than adequate consideration pursuant to such conversion; (8) any transaction between a plan and a common or collective trust fund or pooled investment fund maintained by a disqualified person which is a bank or trust company supervised by a State or Federal agency or between a plan and a pooled investment fund of an insurance company qualified to do business in a State if—(A) the transaction is a sale or purchase of an interest in the fund, (B) the bank, trust company, or insurance company receives not more than a reasonable compensation, and (C) such transaction is expressly permitted by the instrument under which the plan is maintained, or by a fiduciary (other than the bank, trust company, or insurance company, or an affiliate thereof) who has authority to manage and control the assets of the plan; (9) receipt by a disqualified person of any benefit to which he may be entitled as a participant or beneficiary in the plan, so long as the benefit is computed and paid on a basis which is consistent with the terms of the plan as applied to all other participants and beneficiaries; (10) receipt by a disqualified person of any reasonable compensation for services rendered, or for the reimbursement of expenses properly and actually incurred, in the performance of his duties with the plan, but no person so serving who already receives full-time pay from an employer or an association of employers, whose employees are participants in the plan or from an employee organization whose members are participants in such plan shall receive compensation from such fund, except for reimbursement of expenses properly and actually incurred; (11) service by a disqualified person as a fiduciary in addition to being an officer, employee, agent, or other representative of a disqualified person; (12) the making by a fiduciary of a distribution of the assets of the trust in accordance with the terms of the plan if such assets are distributed in the same manner as provided under section 4044 of title IV of the Employee Retirement Income Security Act of 1974 (relating to allocation of assets); (13) any transaction which is exempt from section 406 of such Act by reason of section 408(e) of such Act (or which would be so exempt if such section 406 applied to such transaction) or which is exempt from section 406 of such Act by reason of section 408(b)(12) of such Act; (14) any transaction required or permitted under part 1 of subtitle E of title IV or section 4223 of the Employee Retirement Income Security Act of 1974, but this paragraph shall not apply with respect to the application of subsection (c)(1) (E) or (F); (15) a merger of multiemployer plans, or the transfer of assets or liabilities between multiemployer plans, determined by the Pension Benefit Guaranty Corporation to meet the requirements of section 4231 of such Act, but this paragraph shall not apply with respect to the application of subsection (c)(1)(E) or (F); (16) a sale of stock held by a trust which constitutes an individual retirement account under section 408(a) to the individual for whose benefit such account is established if—(A) such stock is in a bank (as defined in section 581) or a depository institution holding company (as defined in section 3(w)(1) of the Federal Deposit Insurance Act (12 U.S.C. 1813(w)(1))), (B) such stock is held by such trust as of the date of the enactment of this paragraph, (C) such sale is pursuant to an election under section 1362(a) by such bank or company, (D) such sale is for fair market value at the time of sale (as established by an independent appraiser) and the terms of the sale are otherwise at least as favorable to such trust as the terms that would apply on a sale to an unrelated party, (E) such trust does not pay any commissions, costs, or other expenses in connection with the sale, and (F) the stock is sold in a single transaction for cash not later than 120 days after the S corporation election is made; (17) any transaction in connection with the provision of investment advice described in subsection (e)(3)(B) to a participant or beneficiary in a plan that permits such participant or beneficiary to direct the investment of plan assets in an individual account, if—(A) the transaction is—(i) the provision of the investment advice to the participant or beneficiary of the plan with respect to a security or other property available as an investment under the plan, (ii) the acquisition, holding, or sale of a security or other property available as an investment under the plan pursuant to the investment advice, or (iii) the direct or indirect receipt of fees or other compensation by the fiduciary adviser or an affiliate thereof (or any employee, agent, or registered representative of the fiduciary adviser or affiliate) in connection with the provision of the advice or in connection with an acquisition, holding, or sale of a security or other property available as an investment under the plan pursuant to the investment advice; and (B) the requirements of subsection (f)(8) are met,11 So in original. The comma probably should be a semicolon. (18) any transaction involving the purchase or sale of securities, or other property (as determined by the Secretary of Labor), between a plan and a disqualified person (other than a fiduciary described in subsection (e)(3)) with respect to a plan if—(A) the transaction involves a block trade, (B) at the time of the transaction, the interest of the plan (together with the interests of any other plans maintained by the same plan sponsor), does not exceed 10 percent of the aggregate size of the block trade, (C) the terms of the transaction, including the price, are at least as favorable to the plan as an arm’s length 22 So in original. Probably should be “arm’s-length”. transaction, and (D) the compensation associated with the purchase and sale is not greater than the compensation associated with an arm’s length 2 transaction with an unrelated party,1 (19) any transaction involving the purchase or sale of securities, or other property (as determined by the Secretary of Labor), between a plan and a disqualified person if—(A) the transaction is executed through an electronic communication network, alternative trading system, or similar execution system or trading venue subject to regulation and oversight by—(i) the applicable Federal regulating entity, or (ii) such foreign regulatory entity as the Secretary of Labor may determine by regulation, (B) either—(i) the transaction is effected pursuant to rules designed to match purchases and sales at the best price available through the execution system in accordance with applicable rules of the Securities and Exchange Commission or other relevant governmental authority, or (ii) neither the execution system nor the parties to the transaction take into account the identity of the parties in the execution of trades, (C) the price and compensation associated with the purchase and sale are not greater than the price and compensation associated with an arm’s length 2 transaction with an unrelated party, (D) if 33 So in original. The word “if” probably should not appear. the disqualified person has an ownership interest in the system or venue described in subparagraph (A), the system or venue has been authorized by the plan sponsor or other independent fiduciary for transactions described in this paragraph, and (E) not less than 30 days prior to the initial transaction described in this paragraph executed through any system or venue described in subparagraph (A), a plan fiduciary is provided written or electronic notice of the execution of such transaction through such system or venue,1 (20) transactions described in subparagraphs (A), (B), and (D) of subsection (c)(1) between a plan and a person that is a disqualified person other than a fiduciary (or an affiliate) who has or exercises any discretionary authority or control with respect to the investment of the plan assets involved in the transaction or renders investment advice (within the meaning of subsection (e)(3)(B)) with respect to those assets, solely by reason of providing services to the plan or solely by reason of a relationship to such a service provider described in subparagraph (F), (G), (H), or (I) of subsection (e)(2), or both, but only if in connection with such transaction the plan receives no less, nor pays no more, than adequate consideration,1 (21) any foreign exchange transactions, between a bank or broker-dealer (or any affiliate of either) and a plan (as defined in this section) with respect to which such bank or broker-dealer (or affiliate) is a trustee, custodian, fiduciary, or other disqualified person, if—(A) the transaction is in connection with the purchase, holding, or sale of securities or other investment assets (other than a foreign exchange transaction unrelated to any other investment in securities or other investment assets), (B) at the time the foreign exchange transaction is entered into, the terms of the transaction are not less favorable to the plan than the terms generally available in comparable arm’s length 2 foreign exchange transactions between unrelated parties, or the terms afforded by the bank or broker-dealer (or any affiliate of either) in comparable arm’s-length foreign exchange transactions involving unrelated parties, (C) the exchange rate used by such bank or broker-dealer (or affiliate) for a particular foreign exchange transaction does not deviate by more than 3 percent from the interbank bid and asked rates for transactions of comparable size and maturity at the time of the transaction as displayed on an independent service that reports rates of exchange in the foreign currency market for such currency, and (D) the bank or broker-dealer (or any affiliate of either) does not have investment discretion, or provide investment advice, with respect to the transaction,1 (22) any transaction described in subsection (c)(1)(A) involving the purchase and sale of a security between a plan and any other account managed by the same investment manager, if—(A) the transaction is a purchase or sale, for no consideration other than cash payment against prompt delivery of a security for which market quotations are readily available, (B) the transaction is effected at the independent current market price of the security (within the meaning of section 270.17a–7(b) of title 17, Code of Federal Regulations), (C) no brokerage commission, fee (except for customary transfer fees, the fact of which is disclosed pursuant to subparagraph (D)), or other remuneration is paid in connection with the transaction, (D) a fiduciary (other than the investment manager engaging in the cross-trades or any affiliate) for each plan participating in the transaction authorizes in advance of any cross-trades (in a document that is separate from any other written agreement of the parties) the investment manager to engage in cross trades at the investment manager’s discretion, after such fiduciary has received disclosure regarding the conditions under which cross trades may take place (but only if such disclosure is separate from any other agreement or disclosure involving the asset management relationship), including the written policies and procedures of the investment manager described in subparagraph (H), (E) each plan participating in the transaction has assets of at least $100,000,000, except that if the assets of a plan are invested in a master trust containing the assets of plans maintained by employers in the same controlled group (as defined in section 407(d)(7) of the Employee Retirement Income Security Act of 1974), the master trust has assets of at least $100,000,000, (F) the investment manager provides to the plan fiduciary who authorized cross trading under subparagraph (D) a quarterly report detailing all cross trades executed by the investment manager in which the plan participated during such quarter, including the following information, as applicable: (i) the identity of each security bought or sold; (ii) the number of shares or units traded; (iii) the parties involved in the cross-trade; and (iv) trade price and the method used to establish the trade price, (G) the investment manager does not base its fee schedule on the plan’s consent to cross trading, and no other service (other than the investment opportunities and cost savings available through a cross trade) is conditioned on the plan’s consent to cross trading, (H) the investment manager has adopted, and cross-trades are effected in accordance with, written cross-trading policies and procedures that are fair and equitable to all accounts participating in the cross-trading program, and that include a description of the manager’s pricing policies and procedures, and the manager’s policies and procedures for allocating cross trades in an objective manner among accounts participating in the cross-trading program, and (I) the investment manager has designated an individual responsible for periodically reviewing such purchases and sales to ensure compliance with the written policies and procedures described in subparagraph (H), and following such review, the individual shall issue an annual written report no later than 90 days following the period to which it relates signed under penalty of perjury to the plan fiduciary who authorized cross trading under subparagraph (D) describing the steps performed during the course of the review, the level of compliance, and any specific instances of non-compliance. The written report shall also notify the plan fiduciary of the plan’s right to terminate participation in the investment manager’s cross-trading program at any time,1 (23) except as provided in subsection (f)(11), a transaction described in subparagraph (A), (B), (C), or (D) of subsection (c)(1) in connection with the acquisition, holding, or disposition of any security or commodity, if the transaction is corrected before the end of the correction period,1 (24) the provision of a de minimis financial incentive described in section 401(k)(4)(A),1 or (25) the receipt of fees and compensation by the automatic portability provider for services provided in connection with an automatic portability transaction. (e) Definitions(1) PlanFor purposes of this section, the term “plan” means—(A) a trust described in section 401(a) which forms a part of a plan, or a plan described in section 403(a), which trust or plan is exempt from tax under section 501(a), (B) an individual retirement account described in section 408(a), (C) an individual retirement annuity described in section 408(b), (D) an Archer MSA described in section 220(d), (E) a health savings account described in section 223(d), (F) a Coverdell education savings account described in section 530, or (G) a trust, plan, account, or annuity which, at any time, has been determined by the Secretary to be described in any preceding subparagraph of this paragraph. (2) Disqualified personFor purposes of this section, the term “disqualified person” means a person who is—(A) a fiduciary; (B) a person providing services to the plan; (C) an employer any of whose employees are covered by the plan; (D) an employee organization any of whose members are covered by the plan; (E) an owner, direct or indirect, of 50 percent or more of—(i) the combined voting power of all classes of stock entitled to vote or the total value of shares of all classes of stock of a corporation, (ii) the capital interest or the profits interest of a partnership, or (iii) the beneficial interest of a trust or unincorporated enterprise, which is an employer or an employee organization described in subparagraph (C) or (D); (F) a member of the family (as defined in paragraph (6)) of any individual described in subparagraph (A), (B), (C), or (E); (G) a corporation, partnership, or trust or estate of which (or in which) 50 percent or more of—(i) the combined voting power of all classes of stock entitled to vote or the total value of shares of all classes of stock of such corporation, (ii) the capital interest or profits interest of such partnership, or (iii) the beneficial interest of such trust or estate, is owned directly or indirectly, or held by persons described in subparagraph (A), (B), (C), (D), or (E); (H) an officer, director (or an individual having powers or responsibilities similar to those of officers or directors), a 10 percent or more shareholder, or a highly compensated employee (earning 10 percent or more of the yearly wages of an employer) of a person described in subparagraph (C), (D), (E), or (G); or (I) a 10 percent or more (in capital or profits) partner or joint venturer of a person described in subparagraph (C), (D), (E), or (G). The Secretary, after consultation and coordination with the Secretary of Labor or his delegate, may by regulation prescribe a percentage lower than 50 percent for subparagraphs (E) and (G) and lower than 10 percent for subparagraphs (H) and (I). (3) FiduciaryFor purposes of this section, the term “fiduciary” means any person who—(A) exercises any discretionary authority or discretionary control respecting management of such plan or exercises any authority or control respecting management or disposition of its assets, (B) renders investment advice for a fee or other compensation, direct or indirect, with respect to any moneys or other property of such plan, or has any authority or responsibility to do so, or (C) has any discretionary authority or discretionary responsibility in the administration of such plan. Such term includes any person designated under section 405(c)(1)(B) of the Employee Retirement Income Security Act of 1974. (4) StockholdingsFor purposes of paragraphs (2)(E)(i) and (G)(i) there shall be taken into account indirect stockholdings which would be taken into account under section 267(c), except that, for purposes of this paragraph, section 267(c)(4) shall be treated as providing that the members of the family of an individual are the members within the meaning of paragraph (6). (5) Partnerships; trustsFor purposes of paragraphs (2)(E)(ii) and (iii), (G)(ii) and (iii), and (I) the ownership of profits or beneficial interests shall be determined in accordance with the rules for constructive ownership of stock provided in section 267(c) (other than paragraph (3) thereof), except that section 267(c)(4) shall be treated as providing that the members of the family of an individual are the members within the meaning of paragraph (6). (6) Member of familyFor purposes of paragraph (2)(F), the family of any individual shall include his spouse, ancestor, lineal descendant, and any spouse of a lineal descendant. (7) Employee stock ownership planThe term “employee stock ownership plan” means a defined contribution plan—(A) which is a stock bonus plan which is qualified, or a stock bonus and a money purchase plan both of which are qualified under section 401(a), and which are designed to invest primarily in qualifying employer securities; and (B) which is otherwise defined in regulations prescribed by the Secretary. A plan shall not be treated as an employee stock ownership plan unless it meets the requirements of section 409(h), section 409(o), and, if applicable, section 409(n), section 409(p), and section 664(g) and, if the employer has a registration-type class of securities (as defined in section 409(e)(4)), it meets the requirements of section 409(e). (8) Qualifying employer securityThe term “qualifying employer security” means any employer security within the meaning of section 409(l). If any moneys or other property of a plan are invested in shares of an investment company registered under the Investment Company Act of 1940, the investment shall not cause that investment company or that investment company’s investment adviser or principal underwriter to be treated as a fiduciary or a disqualified person for purposes of this section, except when an investment company or its investment adviser or principal underwriter acts in connection with a plan covering employees of the investment company, its investment adviser, or its principal underwriter. (9) Section made applicable to withdrawal liability payment fundsFor purposes of this section—(A) In generalThe term “plan” includes a trust described in section 501(c)(22). (B) Disqualified personIn the case of any trust to which this section applies by reason of subparagraph (A), the term “disqualified person” includes any person who is a disqualified person with respect to any plan to which such trust is permitted to make payments under section 4223 of the Employee Retirement Income Security Act of 1974. (f) Other definitions and special rulesFor purposes of this section—(1) Joint and several liabilityIf more than one person is liable under subsection (a) or (b) with respect to any one prohibited transaction, all such persons shall be jointly and severally liable under such subsection with respect to such transaction. (2) Taxable periodThe term “taxable period” means, with respect to any prohibited transaction, the period beginning with the date on which the prohibited transaction occurs and ending on the earliest of—(A) the date of mailing a notice of deficiency with respect to the tax imposed by subsection (a) under section 6212, (B) the date on which the tax imposed by subsection (a) is assessed, or (C) the date on which correction of the prohibited transaction is completed. (3) Sale or exchange; encumbered propertyA transfer or real or personal property by a disqualified person to a plan shall be treated as a sale or exchange if the property is subject to a mortgage or similar lien which the plan assumes or if it is subject to a mortgage or similar lien which a disqualified person placed on the property within the 10-year period ending on the date of the transfer. (4) Amount involvedThe term “amount involved” means, with respect to a prohibited transaction, the greater of the amount of money and the fair market value of the other property given or the amount of money and the fair market value of the other property received; except that, in the case of services described in paragraphs (2) and (10) of subsection (d) the amount involved shall be only the excess compensation. For purposes of the preceding sentence, the fair market value—(A) in the case of the tax imposed by subsection (a), shall be determined as of the date on which the prohibited transaction occurs; and (B) in the case of the tax imposed by subsection (b), shall be the highest fair market value during the taxable period. (5) CorrectionThe terms “correction” and “correct” mean, with respect to a prohibited transaction, undoing the transaction to the extent possible, but in any case placing the plan in a financial position not worse than that in which it would be if the disqualified person were acting under the highest fiduciary standards. (6) Exemptions not to apply to certain transactions(A) In generalIn the case of a trust described in section 401(a) which is part of a plan providing contributions or benefits for employees some or all of whom are owner-employees (as defined in section 401(c)(3)), the exemptions provided by subsection (d) (other than paragraphs (9) and (12)) shall not apply to a transaction in which the plan directly or indirectly—(i) lends any part of the corpus or income of the plan to, (ii) pays any compensation for personal services rendered to the plan to, or (iii) acquires for the plan any property from, or sells any property to, any such owner-employee, a member of the family (as defined in section 267(c)(4)) of any such owner-employee, or any corporation in which any such owner-employee owns, directly or indirectly, 50 percent or more of the total combined voting power of all classes of stock entitled to vote or 50 percent or more of the total value of shares of all classes of stock of the corporation. (B) Special rules for shareholder-employees, etc.(i) In generalFor purposes of subparagraph (A), the following shall be treated as owner-employees:(I) A shareholder-employee. (II) A participant or beneficiary of an individual retirement plan (as defined in section 7701(a)(37)). (III) An employer or association of employees which establishes such an individual retirement plan under section 408(c). (ii) Exception for certain transactions involving shareholder-employeesSubparagraph (A)(iii) shall not apply to a transaction which consists of a sale of employer securities to an employee stock ownership plan (as defined in subsection (e)(7)) by a shareholder-employee, a member of the family (as defined in section 267(c)(4)) of such shareholder-employee, or a corporation in which such a shareholder-employee owns stock representing a 50 percent or greater interest described in subparagraph (A). (iii) Loan exceptionFor purposes of subparagraph (A)(i), the term “owner-employee” shall only include a person described in subclause (II) or (III) of clause (i). (C) Shareholder-employeeFor purposes of subparagraph (B), the term “shareholder-employee” means an employee or officer of an S corporation who owns (or is considered as owning within the meaning of section 318(a)(1)) more than 5 percent of the outstanding stock of the corporation on any day during the taxable year of such corporation. (7) S corporation repayment of loans for qualifying employer securitiesA plan shall not be treated as violating the requirements of section 401 or 409 or subsection (e)(7), or as engaging in a prohibited transaction for purposes of subsection (d)(3), merely by reason of any distribution (as described in section 1368(a)) with respect to S corporation stock that constitutes qualifying employer securities, which in accordance with the plan provisions is used to make payments on a loan described in subsection (d)(3) the proceeds of which were used to acquire such qualifying employer securities (whether or not allocated to participants). The preceding sentence shall not apply in the case of a distribution which is paid with respect to any employer security which is allocated to a participant unless the plan provides that employer securities with a fair market value of not less than the amount of such distribution are allocated to such participant for the year which (but for the preceding sentence) such distribution would have been allocated to such participant. (8) Provision of investment advice to participant and beneficiaries(A) In generalThe prohibitions provided in subsection (c) shall not apply to transactions described in subsection (d)(17) if the investment advice provided by a fiduciary adviser is provided under an eligible investment advice arrangement. (B) Eligible investment advice arrangementFor purposes of this paragraph, the term “eligible investment advice arrangement” means an arrangement—(i) which either—(I) provides that any fees (including any commission or other compensation) received by the fiduciary adviser for investment advice or with respect to the sale, holding, or acquisition of any security or other property for purposes of investment of plan assets do not vary depending on the basis of any investment option selected, or (II) uses a computer model under an investment advice program meeting the requirements of subparagraph (C) in connection with the provision of investment advice by a fiduciary adviser to a participant or beneficiary, and (ii) with respect to which the requirements of subparagraphs (D), (E), (F), (G), (H), and (I) are met. (C) Investment advice program using computer model(i) In generalAn investment advice program meets the requirements of this subparagraph if the requirements of clauses (ii), (iii), and (iv) are met. (ii) Computer modelThe requirements of this clause are met if the investment advice provided under the investment advice program is provided pursuant to a computer model that—(I) applies generally accepted investment theories that take into account the historic returns of different asset classes over defined periods of time, (II) utilizes relevant information about the participant, which may include age, life expectancy, retirement age, risk tolerance, other assets or sources of income, and preferences as to certain types of investments, (III) utilizes prescribed objective criteria to provide asset allocation portfolios comprised of investment options available under the plan, (IV) operates in a manner that is not biased in favor of investments offered by the fiduciary adviser or a person with a material affiliation or contractual relationship with the fiduciary adviser, and (V) takes into account all investment options under the plan in specifying how a participant’s account balance should be invested and is not inappropriately weighted with respect to any investment option. (iii) Certification(I) In generalThe requirements of this clause are met with respect to any investment advice program if an eligible investment expert certifies, prior to the utilization of the computer model and in accordance with rules prescribed by the Secretary of Labor, that the computer model meets the requirements of clause (ii). (II) Renewal of certificationsIf, as determined under regulations prescribed by the Secretary of Labor, there are material modifications to a computer model, the requirements of this clause are met only if a certification described in subclause (I) is obtained with respect to the computer model as so modified. (III) Eligible investment expertThe term “eligible investment expert” means any person which meets such requirements as the Secretary of Labor may provide and which does not bear any material affiliation or contractual relationship with any investment adviser or a related person thereof (or any employee, agent, or registered representative of the investment adviser or related person). (iv) Exclusivity of recommendationThe requirements of this clause are met with respect to any investment advice program if—(I) the only investment advice provided under the program is the advice generated by the computer model described in clause (ii), and (II) any transaction described in subsection (d)(17)(A)(ii) occurs solely at the direction of the participant or beneficiary. Nothing in the preceding sentence shall preclude the participant or beneficiary from requesting investment advice other than that described in clause (i), but only if such request has not been solicited by any person connected with carrying out the arrangement. (D) Express authorization by separate fiduciaryThe requirements of this subparagraph are met with respect to an arrangement if the arrangement is expressly authorized by a plan fiduciary other than the person offering the investment advice program, any person providing investment options under the plan, or any affiliate of either. (E) Audits(i) In generalThe requirements of this subparagraph are met if an independent auditor, who has appropriate technical training or experience and proficiency and so represents in writing—(I) conducts an annual audit of the arrangement for compliance with the requirements of this paragraph, and (II) following completion of the annual audit, issues a written report to the fiduciary who authorized use of the arrangement which presents its specific findings regarding compliance of the arrangement with the requirements of this paragraph. (ii) Special rule for individual retirement and similar plansIn the case of a plan described in subparagraphs (B) through (F) (and so much of subparagraph (G) as relates to such subparagraphs) of subsection (e)(1), in lieu of the requirements of clause (i), audits of the arrangement shall be conducted at such times and in such manner as the Secretary of Labor may prescribe. (iii) Independent auditorFor purposes of this subparagraph, an auditor is considered independent if it is not related to the person offering the arrangement to the plan and is not related to any person providing investment options under the plan. (F) DisclosureThe requirements of this subparagraph are met if—(i) the fiduciary adviser provides to a participant or a beneficiary before the initial provision of the investment advice with regard to any security or other property offered as an investment option, a written notification (which may consist of notification by means of electronic communication)—(I) of the role of any party that has a material affiliation or contractual relationship with the fiduciary adviser in the development of the investment advice program and in the selection of investment options available under the plan, (II) of the past performance and historical rates of return of the investment options available under the plan, (III) of all fees or other compensation relating to the advice that the fiduciary adviser or any affiliate thereof is to receive (including compensation provided by any third party) in connection with the provision of the advice or in connection with the sale, acquisition, or holding of the security or other property, (IV) of any material affiliation or contractual relationship of the fiduciary adviser or affiliates thereof in the security or other property, (V) of the manner, and under what circumstances, any participant or beneficiary information provided under the arrangement will be used or disclosed, (VI) of the types of services provided by the fiduciary adviser in connection with the provision of investment advice by the fiduciary adviser, (VII) that the adviser is acting as a fiduciary of the plan in connection with the provision of the advice, and (VIII) that a recipient of the advice may separately arrange for the provision of advice by another adviser, that could have no material affiliation with and receive no fees or other compensation in connection with the security or other property, and (ii) at all times during the provision of advisory services to the participant or beneficiary, the fiduciary adviser—(I) maintains the information described in clause (i) in accurate form and in the manner described in subparagraph (H), (II) provides, without charge, accurate information to the recipient of the advice no less frequently than annually, (III) provides, without charge, accurate information to the recipient of the advice upon request of the recipient, and (IV) provides, without charge, accurate information to the recipient of the advice concerning any material change to the information required to be provided to the recipient of the advice at a time reasonably contemporaneous to the change in information. (G) Other conditionsThe requirements of this subparagraph are met if—(i) the fiduciary adviser provides appropriate disclosure, in connection with the sale, acquisition, or holding of the security or other property, in accordance with all applicable securities laws, (ii) the sale, acquisition, or holding occurs solely at the direction of the recipient of the advice, (iii) the compensation received by the fiduciary adviser and affiliates thereof in connection with the sale, acquisition, or holding of the security or other property is reasonable, and (iv) the terms of the sale, acquisition, or holding of the security or other property are at least as favorable to the plan as an arm’s length 2 transaction would be. (H) Standards for presentation of information(i) In generalThe requirements of this subparagraph are met if the notification required to be provided to participants and beneficiaries under subparagraph (F)(i) is written in a clear and conspicuous manner and in a manner calculated to be understood by the average plan participant and is sufficiently accurate and comprehensive to reasonably apprise such participants and beneficiaries of the information required to be provided in the notification. (ii) Model form for disclosure of fees and other compensationThe Secretary of Labor shall issue a model form for the disclosure of fees and other compensation required in subparagraph (F)(i)(III) which meets the requirements of clause (i). (I) Maintenance for 6 years of evidence of complianceThe requirements of this subparagraph are met if a fiduciary adviser who has provided advice referred to in subparagraph (A) maintains, for a period of not less than 6 years after the provision of the advice, any records necessary for determining whether the requirements of the preceding provisions of this paragraph and of subsection (d)(17) have been met. A transaction prohibited under subsection (c) shall not be considered to have occurred solely because the records are lost or destroyed prior to the end of the 6-year period due to circumstances beyond the control of the fiduciary adviser. (J) DefinitionsFor purposes of this paragraph and subsection (d)(17)—(i) Fiduciary adviserThe term “fiduciary adviser” means, with respect to a plan, a person who is a fiduciary of the plan by reason of the provision of investment advice referred to in subsection (e)(3)(B) by the person to a participant or beneficiary of the plan and who is—(I) registered as an investment adviser under the Investment Advisers Act of 1940 (15 U.S.C. 80b–1 et seq.) or under the laws of the State in which the fiduciary maintains its principal office and place of business, (II) a bank or similar financial institution referred to in subsection (d)(4) or a savings association (as defined in section 3(b)(1) of the Federal Deposit Insurance Act (12 U.S.C. 1813(b)(1)), but only if the advice is provided through a trust department of the bank or similar financial institution or savings association which is subject to periodic examination and review by Federal or State banking authorities, (III) an insurance company qualified to do business under the laws of a State, (IV) a person registered as a broker or dealer under the Securities Exchange Act of 1934 (15 U.S.C. 78a et seq.), (V) an affiliate of a person described in any of subclauses (I) through (IV), or (VI) an employee, agent, or registered representative of a person described in subclauses (I) through (V) who satisfies the requirements of applicable insurance, banking, and securities laws relating to the provision of the advice. For purposes of this title, a person who develops the computer model described in subparagraph (C)(ii) or markets the investment advice program or computer model shall be treated as a person who is a fiduciary of the plan by reason of the provision of investment advice referred to in subsection (e)(3)(B) to a participant or beneficiary and shall be treated as a fiduciary adviser for purposes of this paragraph and subsection (d)(17), except that the Secretary of Labor may prescribe rules under which only 1 fiduciary adviser may elect to be treated as a fiduciary with respect to the plan. (ii) AffiliateThe term “affiliate” of another entity means an affiliated person of the entity (as defined in section 2(a)(3) of the Investment Company Act of 1940 (15 U.S.C. 80a–2(a)(3))). (iii) Registered representativeThe term “registered representative” of another entity means a person described in section 3(a)(18) of the Securities Exchange Act of 1934 (15 U.S.C. 78c(a)(18)) (substituting the entity for the broker or dealer referred to in such section) or a person described in section 202(a)(17) of the Investment Advisers Act of 1940 (15 U.S.C. 80b–2(a)(17)) (substituting the entity for the investment adviser referred to in such section). (9) Block tradeThe term “block trade” means any trade of at least 10,000 shares or with a market value of at least $200,000 which will be allocated across two or more unrelated client accounts of a fiduciary. (10) Adequate considerationThe term “adequate consideration” means—(A) in the case of a security for which there is a generally recognized market—(i) the price of the security prevailing on a national securities exchange which is registered under section 6 of the Securities Exchange Act of 1934, taking into account factors such as the size of the transaction and marketability of the security, or (ii) if the security is not traded on such a national securities exchange, a price not less favorable to the plan than the offering price for the security as established by the current bid and asked prices quoted by persons independent of the issuer and of the party in interest, taking into account factors such as the size of the transaction and marketability of the security, and (B) in the case of an asset other than a security for which there is a generally recognized market, the fair market value of the asset as determined in good faith by a fiduciary or fiduciaries in accordance with regulations prescribed by the Secretary of Labor. (11) Correction period(A) In generalFor purposes of subsection (d)(23), the term “correction period” means the 14-day period beginning on the date on which the disqualified person discovers, or reasonably should have discovered, that the transaction would (without regard to this paragraph and subsection (d)(23)) constitute a prohibited transaction. (B) Exceptions(i) Employer securitiesSubsection (d)(23) does not apply to any transaction between a plan and a plan sponsor or its affiliates that involves the acquisition or sale of an employer security (as defined in section 407(d)(1) of the Employee Retirement Income Security Act of 1974) or the acquisition, sale, or lease of employer real property (as defined in section 407(d)(2) of such Act). (ii) Knowing prohibited transactionIn the case of any disqualified person, subsection (d)(23) does not apply to a transaction if, at the time the transaction is entered into, the disqualified person knew (or reasonably should have known) that the transaction would (without regard to this paragraph) constitute a prohibited transaction. (C) Abatement of tax where there is a correctionIf a transaction is not treated as a prohibited transaction by reason of subsection (d)(23), then no tax under subsections (a) and (b) shall be assessed with respect to such transaction, and if assessed the assessment shall be abated, and if collected shall be credited or refunded as an overpayment. (D) DefinitionsFor purposes of this paragraph and subsection (d)(23)—(i) SecurityThe term “security” has the meaning given such term by section 475(c)(2) (without regard to subparagraph (F)(iii) and the last sentence thereof). (ii) CommodityThe term “commodity” has the meaning given such term by section 475(e)(2) (without regard to subparagraph (D)(iii) thereof). (iii) CorrectThe term “correct” means, with respect to a transaction—(I) to undo the transaction to the extent possible and in any case to make good to the plan or affected account any losses resulting from the transaction, and (II) to restore to the plan or affected account any profits made through the use of assets of the plan. (12) Rules relating to automatic portability transactions(A) In generalFor purposes of subsection (d)(25)—(i) Automatic portability transactionAn automatic portability transaction is a transfer of assets made—(I) from an individual retirement plan which is established on behalf of an individual and to which amounts were transferred under section 401(a)(31)(B)(i), (II) to an employer-sponsored retirement plan described in clause (iii), (iv), (v), or (vi) of section 402(c)(8)(B) (other than a defined benefit plan) in which such individual is an active participant, and (III) after such individual has been given advance notice of the transfer and has not affirmatively opted out of such transfer. (ii) Automatic portability providerAn automatic portability provider is a person, other than an individual, who executes transfers described in clause (i). (B) Conditions for automatic portability transactionsSubsection (d)(25) shall not apply to an automatic portability transaction unless the following requirements are satisfied:(i) Acknowledgment of fiduciary statusAn automatic portability provider shall acknowledge in writing, at such time and format as specified by the Secretary of Labor, that the provider is a fiduciary with respect to the individual retirement plan described in subparagraph (A)(i)(I). (ii) FeesThe fees and compensation received, directly or indirectly, by the automatic portability provider for services provided in connection with the automatic portability transaction (including any increase in such fees or compensation and any fees or compensation in connection with, but received before, the transaction)—(I) shall not exceed reasonable compensation, and (II) shall be fully disclosed to and approved in writing in advance of the transaction by a plan fiduciary of the plan described in subparagraph (A)(i)(II) which is independent of the automatic portability provider. An automatic portability provider shall not receive any fees or compensation in connection with an automatic portability transaction involving a plan which is sponsored or maintained by the automatic portability provider. (iii) Data usageThe automatic portability provider shall not market or sell data relating to the individual retirement plan described in subparagraph (A)(i)(I) or to the participants of the plan described in subparagraph (A)(i)(II). (iv) Open participationThe automatic portability provider shall offer automatic portability transactions on the same terms to any plan described in subparagraph (A)(i)(II). (v) Pre-transaction noticeAt least 60 days in advance of an automatic portability transaction, the automatic portability provider shall provide notice to the individual on whose behalf the individual retirement plan described in subparagraph (A)(i)(I) is established which includes—(I) a description of the automatic portability transaction and a complete and accurate statement of all fees which will be charged and all compensation which will be received in connection with the transaction, (II) a clear and prominent description of the individual’s right to affirmatively elect not to participate in the transaction as well as the other available distribution options, the deadline by which the individual must make an election, the procedures for such an election, and a telephone number for the automatic portability provider that the individual may call to make such election, (III) a description of the individual’s right to designate a beneficiary and the procedures to do so, and (IV) such other disclosures as the Secretary of Labor may require by regulation. (vi) Post-transaction noticeNot later than 3 business days after an automatic portability transaction, the automatic portability provider shall provide notice to the individual on whose behalf the individual retirement plan described in subparagraph (A)(i)(I) is established of—(I) the actions taken by the automatic portability provider with respect to the individual’s account, (II) all relevant information regarding the location and amount of any transferred assets, (III) a statement of fees charged against the account by the automatic portability provider or its affiliates in connection with the transfer, (IV) a telephone number at which the individual can contact the automatic portability provider, and (V) such other disclosures as the Secretary of Labor may require by regulation. (vii) Notice requirementsThe notices required under clauses (v) and (vi) shall be written in a manner calculated to be understood by the average person and shall not include inaccurate or misleading statements. (viii) Frequency of searchesThe automatic portability provider shall query on at least a monthly basis whether any individual with an individual retirement plan described in subparagraph (A)(i)(I) has an account in a plan described in subparagraph (A)(i)(II). (ix) Timeliness of executionAfter liquidating the assets of an individual retirement plan described in subparagraph (A)(i)(I) to cash, an automatic portability provider shall transfer the account balance of such plan as soon as practicable to the plan described in subparagraph (A)(i)(II). (x) Limitation on exercise of discretionThe automatic portability provider shall neither have nor exercise discretion to affect the timing or amount of the transfer pursuant to an automatic portability transaction other than to deduct the appropriate fees as described in clause (ii). (xi) Record retention and audits(I) In generalAn automatic portability provider shall, for not less than 6 years after the automatic portability transaction has occurred, maintain the records sufficient to demonstrate the terms of this subparagraph have been met. The automatic portability provider shall make such records available to any authorized employee of the Department of the Treasury or the Department of Labor within 30 calendar days of the date of a written request for such records. (II) AuditsAn automatic portability provider shall conduct an annual audit, in accordance with regulations promulgated by the Secretary of Labor, of automatic portability transactions occurring during the calendar year to demonstrate compliance with this paragraph and any regulations thereunder and identify any instances of noncompliance therewith, and shall submit such audit annually to the Secretary of Labor, in such form and manner as specified by such Secretary. (xii) WebsiteThe automatic portability provider shall maintain a website which contains—(I) a list of recordkeepers for each plan described in subparagraph (A)(i)(II) with respect to which the provider carries out automatic portability transactions, and (II) a list of all fees described in clause (ii)(II) paid to the provider. (g) Application of sectionThis section shall not apply—(1) in the case of a plan to which a guaranteed benefit policy (as defined in section 401(b)(2)(B) of the Employee Retirement Income Security Act of 1974) is issued, to any assets of the insurance company, insurance service, or insurance organization merely because of its issuance of such policy; (2) to a governmental plan (within the meaning of section 414(d)); or (3) to a church plan (within the meaning of section 414(e)) with respect to which the election provided by section 410(d) has not been made. In the case of a plan which invests in any security issued by an investment company registered under the Investment Company Act of 1940, the assets of such plan shall be deemed to include such security but shall not, by reason of such investment, be deemed to include any assets of such company. (h) Notification of Secretary of LaborBefore sending a notice of deficiency with respect to the tax imposed by subsection (a) or (b), the Secretary shall notify the Secretary of Labor and provide him a reasonable opportunity to obtain a correction of the prohibited transaction or to comment on the imposition of such tax. (i) Cross referenceFor provisions concerning coordination procedures between Secretary of Labor and Secretary of the Treasury with respect to application of tax imposed by this section and for authority to waive imposition of the tax imposed by subsection (b), see section 3003 of the Employee Retirement Income Security Act of 1974.

26 U.S.C. § 4976 Taxes with respect to funded welfare benefit plans

(a) General ruleIf—(1) an employer maintains a welfare benefit fund, and (2) there is a disqualified benefit provided during any taxable year, there is hereby imposed on such employer a tax equal to 100 percent of such disqualified benefit. (b) Disqualified benefitFor purposes of subsection (a)—(1) In generalThe term “disqualified benefit” means—(A) any post-retirement medical benefit or life insurance benefit provided with respect to a key employee if a separate account is required to be established for such employee under section 419A(d) and such payment is not from such account, (B) any post-retirement medical benefit or life insurance benefit provided with respect to an individual in whose favor discrimination is prohibited unless the plan meets the requirements of section 505(b) with respect to such benefit (whether or not such requirements apply to such plan), and (C) any portion of a welfare benefit fund reverting to the benefit of the employer. (2) Exception for collective bargaining plansParagraph (1)(B) shall not apply to any plan maintained pursuant to an agreement between employee representatives and 1 or more employers if the Secretary finds that such agreement is a collective bargaining agreement and that the benefits referred to in paragraph (1)(B) were the subject of good faith bargaining between such employee representatives and such employer or employers. (3) Exception for nondeductible contributionsParagraph (1)(C) shall not apply to any amount attributable to a contribution to the fund which is not allowable as a deduction under section 419 for the taxable year or any prior taxable year (and such contribution shall not be included in any carryover under section 419(d)). (4) Exception for certain amounts charged against existing reserveSubparagraphs (A) and (B) of paragraph (1) shall not apply to post-retirement benefits charged against an existing reserve for post-retirement medical or life insurance benefits (as defined in section 512(a)(3)(E)) or charged against the income on such reserve. (c) DefinitionsFor purposes of this section, the terms used in this section shall have the same respective meanings as when used in subpart D of part I of subchapter D of chapter 1.

26 U.S.C. § 4977 Tax on certain fringe benefits provided by an employer

(a) Imposition of taxIn the case of an employer to whom an election under this section applies for any calendar year, there is hereby imposed a tax for such calendar year equal to 30 percent of the excess fringe benefits. (b) Excess fringe benefitsFor purposes of subsection (a), the term “excess fringe benefits” means, with respect to any calendar year—(1) the aggregate value of the fringe benefits provided by the employer during the calendar year which were not includible in gross income under paragraphs (1) and (2) of section 132(a), over (2) 1 percent of the aggregate amount of compensation—(A) which was paid by the employer during such calendar year to employees, and (B) was includible in gross income for purposes of chapter 1. (c) Effect of election on section 132(a)If—(1) an election under this section is in effect with respect to an employer for any calendar year, and (2) at all times on or after January 1, 1984, and before the close of the calendar year involved, substantially all of the employees of the employer were entitled to employee discounts on goods or services provided by the employer in 1 line of business, for purposes of paragraphs (1) and (2) of section 132(a) (but not for purposes of section 132(h)), all employees of any line of business of the employer which was in existence on January 1, 1984, shall be treated as employees of the line of business referred to in paragraph (2). (d) Period of electionAn election under this section shall apply to the calendar year for which made and all subsequent calendar years unless revoked by the employer. (e) Treatment of controlled groupsAll employees treated as employed by a single employer under subsection (b), (c), or (m) of section 414 shall be treated as employed by a single employer for purposes of this section. (f) Section to apply only to employment within the United StatesExcept as otherwise provided in regulations, this section shall apply only with respect to employment within the United States.

26 U.S.C. § 4978 Tax on certain dispositions by employee stock ownership plans and certain cooperatives

(a) Tax on dispositions of securities to which section 1042 applies before close of minimum holding periodIf, during the 3-year period after the date on which the employee stock ownership plan or eligible worker-owned cooperative acquired any qualified securities in a sale to which section 1042 applied or acquired any qualified employer securities in a qualified gratuitous transfer to which section 664(g) applied, such plan or cooperative disposes of any qualified securities and—(1) the total number of shares held by such plan or cooperative after such disposition is less than the total number of employer securities held immediately after such sale, or (2) except to the extent provided in regulations, the value of qualified securities held by such plan or cooperative after such disposition is less than 30 percent of the total value of all employer securities as of such disposition (60 percent of the total value of all employer securities as of such disposition in the case of any qualified employer securities acquired in a qualified gratuitous transfer to which section 664(g) applied), there is hereby imposed a tax on the disposition equal to the amount determined under subsection (b). (b) Amount of tax(1) In generalThe amount of the tax imposed by subsection (a) shall be equal to 10 percent of the amount realized on the disposition. (2) LimitationThe amount realized taken into account under paragraph (1) shall not exceed that portion allocable to qualified securities acquired in the sale to which section 1042 applied or acquired in the qualified gratuitous transfer to which section 664(g) applied determined as if such securities were disposed of—(A) first from qualified securities to which section 1042 applied or to which section 664(g) applied acquired during the 3-year period ending on the date of the disposition, beginning with the securities first so acquired, and (B) then from any other employer securities. If subsection (d) applies to a disposition, the disposition shall be treated as made from employer securities in the opposite order of the preceding sentence. (3) Distributions to employeesThe amount realized on any distribution to an employee for less than fair market value shall be determined as if the qualified security had been sold to the employee at fair market value. (c) Liability for payment of taxesThe tax imposed by this subsection shall be paid by—(1) the employer, or (2) the eligible worker-owned cooperative, that made the written statement described in section 664(g)(1)(E) or in section 1042(b)(3) (as the case may be). (d) Section not to apply to certain dispositions(1) Certain distributions to employeesThis section shall not apply with respect to any distribution of qualified securities (or sale of such securities) which is made by reason of—(A) the death of the employee, (B) the retirement of the employee after the employee has attained 59½ years of age, (C) the disability of the employee (within the meaning of section 72(m)(7)), or (D) the separation of the employee from service for any period which results in a 1-year break in service (within the meaning of section 411(a)(6)(A)). (2) Certain reorganizationsIn the case of any exchange of qualified securities in any reorganization described in section 368(a)(1) for stock of another corporation, such exchange shall not be treated as a disposition for purposes of this section. (3) Liquidation of corporation into cooperativeIn the case of any exchange of qualified securities pursuant to the liquidation of the corporation issuing qualified securities into the eligible worker-owned cooperative in a transaction which meets the requirements of section 332 (determined by substituting “100 percent” for “80 percent” each place it appears in section 332(b)(1)), such exchange shall not be treated as a disposition for purposes of this section. (4) Dispositions to meet diversification requirementsThis section shall not apply to any disposition of qualified securities which is required under section 401(a)(28). (e) Definitions and special rulesFor purposes of this section—(1) Employee stock ownership planThe term “employee stock ownership plan” has the meaning given to such term by section 4975(e)(7). (2) Qualified securitiesThe term “qualified securities” has the meaning given to such term by section 1042(c)(1); except that such section shall be applied without regard to subparagraph (B) thereof for purposes of applying this section and section 4979A with respect to securities acquired in a qualified gratuitous transfer (as defined in section 664(g)(1)). (3) Eligible worker-owned cooperativeThe term “eligible worker-owned cooperative” has the meaning given to such term by section 1042(c)(2). (4) DispositionThe term “disposition” includes any distribution. (5) Employer securitiesThe term “employer securities” has the meaning given to such term by section 409(l).

26 U.S.C. § 4979 Tax on certain excess contributions

(a) General ruleIn the case of any plan, there is hereby imposed a tax for the taxable year equal to 10 percent of the sum of—(1) any excess contributions under such plan for the plan year ending in such taxable year, and (2) any excess aggregate contributions under the plan for the plan year ending in such taxable year. (b) Liability for taxThe tax imposed by subsection (a) shall be paid by the employer. (c) Excess contributionsFor purposes of this section, the term “excess contributions” has the meaning given such term by sections 401(k)(8)(B), 408(k)(6)(C), and 501(c)(18). (d) Excess aggregate contributionFor purposes of this section, the term “excess aggregate contribution” has the meaning given to such term by section 401(m)(6)(B). For purposes of determining excess aggregate contributions under an annuity contract described in section 403(b), such contract shall be treated as a plan described in subsection (e)(1). (e) PlanFor purposes of this section, the term “plan” means—(1) a plan described in section 401(a) which includes a trust exempt from tax under section 501(a), (2) any annuity plan described in section 403(a), (3) any annuity contract described in section 403(b), (4) a simplified employee pension of an employer which satisfies the requirements of section 408(k), and (5) a plan described in section 501(c)(18). Such term includes any plan which, at any time, has been determined by the Secretary to be such a plan. (f) No tax where excess distributed within specified period after close of year(1) In generalNo tax shall be imposed under this section on any excess contribution or excess aggregate contribution, as the case may be, to the extent such contribution (together with any income allocable thereto through the end of the plan year for which the contribution was made) is distributed (or, if forfeitable, is forfeited) before the close of the first 2½ months (6 months in the case of an excess contribution or excess aggregate contribution to an eligible automatic contribution arrangement (as defined in section 414(w)(3))) of the following plan year. (2) Year of inclusionAny amount distributed as provided in paragraph (1) shall be treated as earned and received by the recipient in the recipient’s taxable year in which such distributions were made.

26 U.S.C. § 4979A Tax on certain prohibited allocations of qualified securities

(a) Imposition of taxIf—(1) there is a prohibited allocation of qualified securities by any employee stock ownership plan or eligible worker-owned cooperative, (2) there is an allocation described in section 664(g)(5)(A), (3) there is any allocation of employer securities which violates the provisions of section 409(p), or a nonallocation year described in subsection (e)(2)(C) with respect to an employee stock ownership plan, or (4) any synthetic equity is owned by a disqualified person in any nonallocation year, there is hereby imposed a tax on such allocation or ownership equal to 50 percent of the amount involved. (b) Prohibited allocationFor purposes of this section, the term “prohibited allocation” means—(1) any allocation of qualified securities acquired in a sale to which section 1042 applies which violates the provisions of section 409(n), and (2) any benefit which accrues to any person in violation of the provisions of section 409(n). (c) Liability for taxThe tax imposed by this section shall be paid—(1) in the case of an allocation referred to in paragraph (1) or (2) of subsection (a), by—(A) the employer sponsoring such plan, or (B) the eligible worker-owned cooperative, which made the written statement described in section 664(g)(1)(E) or in section 1042(b)(3)(B) (as the case may be), and (2) in the case of an allocation or ownership referred to in paragraph (3) or (4) of subsection (a), by the S corporation the stock in which was so allocated or owned. (d) Special statute of limitations for tax attributable to certain allocationsThe statutory period for the assessment of any tax imposed by this section on an allocation described in subsection (a)(2) of qualified employer securities shall not expire before the date which is 3 years from the later of—(1) the 1st allocation of such securities in connection with a qualified gratuitous transfer (as defined in section 664(g)(1)), or (2) the date on which the Secretary is notified of the allocation described in subsection (a)(2). (e) Definitions and special rulesFor purposes of this section—(1) DefinitionsExcept as provided in paragraph (2), terms used in this section have the same respective meanings as when used in sections 409 and 4978. (2) Special rules relating to tax imposed by reason of paragraph (3) or (4) of subsection (a)(A) Prohibited allocationsThe amount involved with respect to any tax imposed by reason of subsection (a)(3) is the amount allocated to the account of any person in violation of section 409(p)(1). (B) Synthetic equityThe amount involved with respect to any tax imposed by reason of subsection (a)(4) is the value of the shares on which the synthetic equity is based. (C) Special rule during first nonallocation yearFor purposes of subparagraph (A), the amount involved for the first nonallocation year of any employee stock ownership plan shall be determined by taking into account the total value of all the deemed-owned shares of all disqualified persons with respect to such plan. (D) Statute of limitationsThe statutory period for the assessment of any tax imposed by this section by reason of paragraph (3) or (4) of subsection (a) shall not expire before the date which is 3 years from the later of—(i) the allocation or ownership referred to in such paragraph giving rise to such tax, or (ii) the date on which the Secretary is notified of such allocation or ownership.

26 U.S.C. § 4980 Tax on reversion of qualified plan assets to employer

(a) Imposition of taxThere is hereby imposed a tax of 20 percent of the amount of any employer reversion from a qualified plan. (b) Liability for taxThe tax imposed by subsection (a) shall be paid by the employer maintaining the plan. (c) Definitions and special rulesFor purposes of this section—(1) Qualified planThe term “qualified plan” means any plan meeting the requirements of section 401(a) or 403(a), other than—(A) a plan maintained by an employer if such employer has, at all times, been exempt from tax under subtitle A, or (B) a governmental plan (within the meaning of section 414(d)). Such term shall include any plan which, at any time, has been determined by the Secretary to be a qualified plan. (2) Employer reversion(A) In generalThe term “employer reversion” means the amount of cash and the fair market value of other property received (directly or indirectly) by an employer from the qualified plan. (B) ExceptionsThe term “employer reversion” shall not include—(i) except as provided in regulations, any amount distributed to or on behalf of any employee (or his beneficiaries) if such amount could have been so distributed before termination of such plan without violating any provision of section 401, (ii) any distribution to the employer which is allowable under section 401(a)(2)—(I) in the case of a multiemployer plan, by reason of mistakes of law or fact or the return of any withdrawal liability payment, (II) in the case of a plan other than a multiemployer plan, by reason of mistake of fact, or (III) in the case of any plan, by reason of the failure of the plan to initially qualify or the failure of contributions to be deductible, or (iii) any transfer described in section 420(f)(2)(B)(ii)(II). (3) Exception for employee stock ownership plans(A) In generalIf, upon an employer reversion from a qualified plan, any applicable amount is transferred from such plan to an employee stock ownership plan described in section 4975(e)(7) or a tax credit employee stock ownership plan (as described in section 409), such amount shall not be treated as an employer reversion for purposes of this section (or includible in the gross income of the employer) if the requirements of subparagraphs (B), (C), and (D) are met. (B) Investment in employer securitiesThe requirements of this subparagraph are met if, within 90 days after the transfer (or such longer period as the Secretary may prescribe), the amount transferred is invested in employer securities (as defined in section 409(l)) or used to repay loans used to purchase such securities. (C) Allocation requirementsThe requirements of this subparagraph are met if the portion of the amount transferred which is not allocated under the plan to accounts of participants in the plan year in which the transfer occurs—(i) is credited to a suspense account and allocated from such account to accounts of participants no less rapidly than ratably over a period not to exceed 7 years, and (ii) when allocated to accounts of participants under the plan, is treated as an employer contribution for purposes of section 415(c), except that—(I) the annual addition (as determined under section 415(c)) attributable to each such allocation shall not exceed the value of such securities as of the time such securities were credited to such suspense account, and (II) no additional employer contributions shall be permitted to an employee stock ownership plan described in subparagraph (A) of the employer before the allocation of such amount. The amount allocated in the year of transfer shall not be less than the lesser of the maximum amount allowable under section 415 or ⅛ of the amount attributable to the securities acquired. In the case of dividends on securities held in the suspense account, the requirements of this subparagraph are met only if the dividends are allocated to accounts of participants or paid to participants in proportion to their accounts, or used to repay loans used to purchase employer securities. (D) ParticipantsThe requirements of this subparagraph are met if at least half of the participants in the qualified plan are participants in the employee stock ownership plan (as of the close of the 1st plan year for which an allocation of the securities is required). (E) Applicable amountFor purposes of this paragraph, the term “applicable amount” means any amount which—(i) is transferred after March 31, 1985, and before January 1, 1989, or (ii) is transferred after December 31, 1988, pursuant to a termination which occurs after March 31, 1985, and before January 1, 1989. (F) No credit or deduction allowedNo credit or deduction shall be allowed under chapter 1 for any amount transferred to an employee stock ownership plan in a transfer to which this paragraph applies. (G) Amount transferred to include income thereon, etc.The amount transferred shall not be treated as meeting the requirements of subparagraphs (B) and (C) unless amounts attributable to such amount also meet such requirements. (4) Time for payment of taxFor purposes of subtitle F, the time for payment of the tax imposed by subsection (a) shall be the last day of the month following the month in which the employer reversion occurs. (d) Increase in tax for failure to establish replacement plan or increase benefits(1) In generalSubsection (a) shall be applied by substituting “50 percent” for “20 percent” with respect to any employer reversion from a qualified plan unless—(A) the employer establishes or maintains a qualified replacement plan, or (B) the plan provides benefit increases meeting the requirements of paragraph (3). (2) Qualified replacement planFor purposes of this subsection, the term “qualified replacement plan” means a qualified plan established or maintained by the employer in connection with a qualified plan termination (hereinafter referred to as the “replacement plan”) with respect to which the following requirements are met:(A) Participation requirementAt least 95 percent of the active participants in the terminated plan who remain as employees of the employer after the termination are active participants in the replacement plan. (B) Asset transfer requirement(i) 25 percent cushionA direct transfer from the terminated plan to the replacement plan is made before any employer reversion, and the transfer is in an amount equal to the excess (if any) of—(I) 25 percent of the maximum amount which the employer could receive as an employer reversion without regard to this subsection, over (II) the amount determined under clause (ii). (ii) Reduction for increase in benefitsThe amount determined under this clause is an amount equal to the present value of the aggregate increases in the accrued benefits under the terminated plan of any participants or beneficiaries pursuant to a plan amendment which—(I) is adopted during the 60-day period ending on the date of termination of the qualified plan, and (II) takes effect immediately on the termination date. (iii) Treatment of amount transferredIn the case of the transfer of any amount under clause (i)—(I) such amount shall not be includible in the gross income of the employer, (II) no deduction shall be allowable with respect to such transfer, and (III) such transfer shall not be treated as an employer reversion for purposes of this section. (C) Allocation requirements(i) In generalIn the case of any defined contribution plan, the portion of the amount transferred to the replacement plan under subparagraph (B)(i) is—(I) allocated under the plan to the accounts of participants in the plan year in which the transfer occurs, or (II) credited to a suspense account and allocated from such account to accounts of participants no less rapidly than ratably over the 7-plan-year period beginning with the year of the transfer. (ii) Coordination with section 415 limitationIf, by reason of any limitation under section 415, any amount credited to a suspense account under clause (i)(II) may not be allocated to a participant before the close of the 7-year period under such clause—(I) such amount shall be allocated to the accounts of other participants, and (II) if any portion of such amount may not be allocated to other participants by reason of any such limitation, shall be allocated to the participant as provided in section 415. (iii) Treatment of incomeAny income on any amount credited to a suspense account under clause (i)(II) shall be allocated to accounts of participants no less rapidly than ratably over the remainder of the period determined under such clause (after application of clause (ii)). (iv) Unallocated amounts at terminationIf any amount credited to a suspense account under clause (i)(II) is not allocated as of the termination date of the replacement plan—(I) such amount shall be allocated to the accounts of participants as of such date, except that any amount which may not be allocated by reason of any limitation under section 415 shall be allocated to the accounts of other participants, and (II) if any portion of such amount may not be allocated to other participants under subclause (I) by reason of such limitation, such portion shall be treated as an employer reversion to which this section applies. (3) Pro rata benefit increases(A) In generalThe requirements of this paragraph are met if a plan amendment to the terminated plan is adopted in connection with the termination of the plan which provides pro rata increases in the accrued benefits of all qualified participants which—(i) have an aggregate present value not less than 20 percent of the maximum amount which the employer could receive as an employer reversion without regard to this subsection, and (ii) take effect immediately on the termination date. (B) Pro rata increaseFor purposes of subparagraph (A), a pro rata increase is an increase in the present value of the accrued benefit of each qualified participant in an amount which bears the same ratio to the aggregate amount determined under subparagraph (A)(i) as—(i) the present value of such participant’s accrued benefit (determined without regard to this subsection), bears to (ii) the aggregate present value of accrued benefits of the terminated plan (as so determined). Notwithstanding the preceding sentence, the aggregate increases in the present value of the accrued benefits of qualified participants who are not active participants shall not exceed 40 percent of the aggregate amount determined under subparagraph (A)(i) by substituting “equal to” for “not less than”. (4) Coordination with other provisions(A) LimitationsA benefit may not be increased under paragraph (2)(B)(ii) or (3)(A), and an amount may not be allocated to a participant under paragraph (2)(C), if such increase or allocation would result in a failure to meet any requirement under section 401(a)(4) or 415. (B) Treatment as employer contributionsAny increase in benefits under paragraph (2)(B)(ii) or (3)(A), or any allocation of any amount (or income allocable thereto) to any account under paragraph (2)(C), shall be treated as an annual benefit or annual addition for purposes of section 415. (C) 10-year participation requirementExcept as provided by the Secretary, section 415(b)(5)(D) shall not apply to any increase in benefits by reason of this subsection to the extent that the application of this subparagraph does not discriminate in favor of highly compensated employees (as defined in section 414(q)). (5) Definitions and special rulesFor purposes of this subsection—(A) Qualified participantThe term “qualified participant” means an individual who—(i) is an active participant, (ii) is a participant or beneficiary in pay status as of the termination date, (iii) is a participant not described in clause (i) or (ii)—(I) who has a nonforfeitable right to an accrued benefit under the terminated plan as of the termination date, and (II) whose service, which was creditable under the terminated plan, terminated during the period beginning 3 years before the termination date and ending with the date on which the final distribution of assets occurs, or (iv) is a beneficiary of a participant described in clause (iii)(II) and has a nonforfeitable right to an accrued benefit under the terminated plan as of the termination date. (B) Present valuePresent value shall be determined as of the termination date and on the same basis as liabilities of the plan are determined on termination. (C) Reallocation of increaseExcept as provided in paragraph (2)(C), if any benefit increase is reduced by reason of the last sentence of paragraph (3)(A)(ii) or paragraph (4), the amount of such reduction shall be allocated to the remaining participants on the same basis as other increases (and shall be treated as meeting any allocation requirement of this subsection). (D) Plans taken into accountFor purposes of determining whether there is a qualified replacement plan under paragraph (2), the Secretary may provide that—(i) 2 or more plans may be treated as 1 plan, or (ii) a plan of a successor employer may be taken into account. (E) Special rule for participation requirementFor purposes of paragraph (2)(A), all employers treated as 1 employer under section 414(b), (c), (m), or (o) shall be treated as 1 employer. (6) Subsection not to apply to employer in bankruptcyThis subsection shall not apply to an employer who, as of the termination date of the qualified plan, is in bankruptcy liquidation under chapter 7 of title 11 of the United States Code or in similar proceedings under State law.

26 U.S.C. § 4980B Failure to satisfy continuation coverage requirements of group health plans

(a) General ruleThere is hereby imposed a tax on the failure of a group health plan to meet the requirements of subsection (f) with respect to any qualified beneficiary. (b) Amount of tax(1) In generalThe amount of the tax imposed by subsection (a) on any failure with respect to a qualified beneficiary shall be $100 for each day in the noncompliance period with respect to such failure. (2) Noncompliance periodFor purposes of this section, the term “noncompliance period” means, with respect to any failure, the period—(A) beginning on the date such failure first occurs, and (B) ending on the earlier of—(i) the date such failure is corrected, or (ii) the date which is 6 months after the last day in the period applicable to the qualified beneficiary under subsection (f)(2)(B) (determined without regard to clause (iii) thereof). If a person is liable for tax under subsection (e)(1)(B) by reason of subsection (e)(2)(B) with respect to any failure, the noncompliance period for such person with respect to such failure shall not begin before the 45th day after the written request described in subsection (e)(2)(B) is provided to such person. (3) Minimum tax for noncompliance period where failure discovered after notice of examinationNotwithstanding paragraphs (1) and (2) of subsection (c)—(A) In generalIn the case of 1 or more failures with respect to a qualified beneficiary—(i) which are not corrected before the date a notice of examination of income tax liability is sent to the employer, and (ii) which occurred or continued during the period under examination, the amount of tax imposed by subsection (a) by reason of such failures with respect to such beneficiary shall not be less than the lesser of $2,500 or the amount of tax which would be imposed by subsection (a) without regard to such paragraphs. (B) Higher minimum tax where violations are more than de minimisTo the extent violations by the employer (or the plan in the case of a multiemployer plan) for any year are more than de minimis, subparagraph (A) shall be applied by substituting “$15,000” for “$2,500” with respect to the employer (or such plan). (c) Limitations on amount of tax(1) Tax not to apply where failure not discovered exercising reasonable diligenceNo tax shall be imposed by subsection (a) on any failure during any period for which it is established to the satisfaction of the Secretary that none of the persons referred to in subsection (e) knew, or exercising reasonable diligence would have known, that such failure existed. (2) Tax not to apply to failures corrected within 30 daysNo tax shall be imposed by subsection (a) on any failure if—(A) such failure was due to reasonable cause and not to willful neglect, and (B) such failure is corrected during the 30-day period beginning on the 1st date any of the persons referred to in subsection (e) knew, or exercising reasonable diligence would have known, that such failure existed. (3) $100 limit on amount of tax for failures on any day with respect to a qualified beneficiary(A) In generalExcept as provided in subparagraph (B), the maximum amount of tax imposed by subsection (a) on failures on any day during the noncompliance period with respect to a qualified beneficiary shall be $100. (B) Special rule where more than 1 qualified beneficiaryIf there is more than 1 qualified beneficiary with respect to the same qualifying event, the maximum amount of tax imposed by subsection (a) on all failures on any day during the noncompliance period with respect to such qualified beneficiaries shall be $200. (4) Overall limitation for unintentional failuresIn the case of failures which are due to reasonable cause and not to willful neglect—(A) Single employer plans(i) In generalIn the case of failures with respect to plans other than multiemployer plans, the tax imposed by subsection (a) for failures during the taxable year of the employer shall not exceed the amount equal to the lesser of—(I) 10 percent of the aggregate amount paid or incurred by the employer (or predecessor employer) during the preceding taxable year for group health plans, or (II) $500,000. (ii) Taxable years in the case of certain controlled groupsFor purposes of this subparagraph, if not all persons who are treated as a single employer for purposes of this section have the same taxable year, the taxable years taken into account shall be determined under principles similar to the principles of section 1561. (B) Multiemployer plans(i) In generalIn the case of failures with respect to a multiemployer plan, the tax imposed by subsection (a) for failures during the taxable year of the trust forming part of such plan shall not exceed the amount equal to the lesser of—(I) 10 percent of the amount paid or incurred by such trust during such taxable year to provide medical care (as defined in section 213(d)) directly or through insurance, reimbursement, or otherwise, or (II) $500,000. For purposes of the preceding sentence, all plans of which the same trust forms a part shall be treated as 1 plan. (ii) Special rule for employers required to pay taxIf an employer is assessed a tax imposed by subsection (a) by reason of a failure with respect to a multiemployer plan, the limit shall be determined under subparagraph (A) (and not under this subparagraph) and as if such plan were not a multiemployer plan. (C) Special rule for persons providing benefitsIn the case of a person described in subsection (e)(1)(B) (and not subsection (e)(1)(A)), the aggregate amount of tax imposed by subsection (a) for failures during a taxable year with respect to all plans shall not exceed $2,000,000. (5) Waiver by SecretaryIn the case of a failure which is due to reasonable cause and not to willful neglect, the Secretary may waive part or all of the tax imposed by subsection (a) to the extent that the payment of such tax would be excessive relative to the failure involved. (d) Tax not to apply to certain plansThis section shall not apply to—(1) any failure of a group health plan to meet the requirements of subsection (f) with respect to any qualified beneficiary if the qualifying event with respect to such beneficiary occurred during the calendar year immediately following a calendar year during which all employers maintaining such plan normally employed fewer than 20 employees on a typical business day, (2) any governmental plan (within the meaning of section 414(d)), or (3) any church plan (within the meaning of section 414(e)). (e) Liability for tax(1) In generalExcept as otherwise provided in this subsection, the following shall be liable for the tax imposed by subsection (a) on a failure:(A)(i) In the case of a plan other than a multiemployer plan, the employer. (ii) In the case of a multiemployer plan, the plan. (B) Each person who is responsible (other than in a capacity as an employee) for administering or providing benefits under the plan and whose act or failure to act caused (in whole or in part) the failure. (2) Special rules for persons described in paragraph (1)(B)(A) No liability unless written agreementExcept in the case of liability resulting from the application of subparagraph (B) of this paragraph, a person described in subparagraph (B) (and not in subparagraph (A)) of paragraph (1) shall be liable for the tax imposed by subsection (a) on any failure only if such person assumed (under a legally enforceable written agreement) responsibility for the performance of the act to which the failure relates. (B) Failure to cover qualified beneficiaries where current employees are coveredA person shall be treated as described in paragraph (1)(B) with respect to a qualified beneficiary if—(i) such person provides coverage under a group health plan for any similarly situated beneficiary under the plan with respect to whom a qualifying event has not occurred, and (ii) the—(I) employer or plan administrator, or (II) in the case of a qualifying event described in subparagraph (C) or (E) of subsection (f)(3) where the person described in clause (i) is the plan administrator, the qualified beneficiary, submits to such person a written request that such person make available to such qualified beneficiary the same coverage which such person provides to the beneficiary referred to in clause (i). (f) Continuation coverage requirements of group health plans(1) In generalA group health plan meets the requirements of this subsection only if the coverage of the costs of pediatric vaccines (as defined under section 1928(h)(6) of the Social Security Act (42 U.S.C. 1396s(h)(6))) is not reduced below the coverage provided by the plan as of May 1, 1993, and only if each qualified beneficiary who would lose coverage under the plan as a result of a qualifying event is entitled to elect, within the election period, continuation coverage under the plan. (2) Continuation coverageFor purposes of paragraph (1), the term “continuation coverage” means coverage under the plan which meets the following requirements:(A) Type of benefit coverageThe coverage must consist of coverage which, as of the time the coverage is being provided, is identical to the coverage provided under the plan to similarly situated beneficiaries under the plan with respect to whom a qualifying event has not occurred. If coverage under the plan is modified for any group of similarly situated beneficiaries, the coverage shall also be modified in the same manner for all individuals who are qualified beneficiaries under the plan pursuant to this subsection in connection with such group. (B) Period of coverageThe coverage must extend for at least the period beginning on the date of the qualifying event and ending not earlier than the earliest of the following:(i) Maximum required period(I) General rule for terminations and reduced hoursIn the case of a qualifying event described in paragraph (3)(B), except as provided in subclause (II), the date which is 18 months after the date of the qualifying event. (II) Special rule for multiple qualifying eventsIf a qualifying event (other than a qualifying event described in paragraph (3)(F)) occurs during the 18 months after the date of a qualifying event described in paragraph (3)(B), the date which is 36 months after the date of the qualifying event described in paragraph (3)(B). (III) Special rule for certain bankruptcy proceedingsIn the case of a qualifying event described in paragraph (3)(F) (relating to bankruptcy proceedings), the date of the death of the covered employee or qualified beneficiary (described in subsection (g)(1)(D)(iii)), or in the case of the surviving spouse or dependent children of the covered employee, 36 months after the date of the death of the covered employee. (IV) General rule for other qualifying eventsIn the case of a qualifying event not described in paragraph (3)(B) or (3)(F), the date which is 36 months after the date of the qualifying event. (V) Special rule for PBGC recipientsIn the case of a qualifying event described in paragraph (3)(B) with respect to a covered employee who (as of such qualifying event) has a nonforfeitable right to a benefit any portion of which is to be paid by the Pension Benefit Guaranty Corporation under title IV of the Employee Retirement Income Security Act of 1974, notwithstanding subclause (I) or (II), the date of the death of the covered employee, or in the case of the surviving spouse or dependent children of the covered employee, 24 months after the date of the death of the covered employee. The preceding sentence shall not require any period of coverage to extend beyond January 1, 2014. (VI) Special rule for TAA-eligible individualsIn the case of a qualifying event described in paragraph (3)(B) with respect to a covered employee who is (as of the date that the period of coverage would, but for this subclause or subclause (VII), otherwise terminate under subclause (I) or (II)) a TAA-eligible individual (as defined in paragraph (5)(C)(iv)(II)), the period of coverage shall not terminate by reason of subclause (I) or (II), as the case may be, before the later of the date specified in such subclause or the date on which such individual ceases to be such a TAA-eligible individual. The preceding sentence shall not require any period of coverage to extend beyond January 1, 2014. (VII) Medicare entitlement followed by qualifying eventIn the case of a qualifying event described in paragraph (3)(B) that occurs less than 18 months after the date the covered employee became entitled to benefits under title XVIII of the Social Security Act, the period of coverage for qualified beneficiaries other than the covered employee shall not terminate under this clause before the close of the 36-month period beginning on the date the covered employee became so entitled. (VIII) Special rule for disabilityIn the case of a qualified beneficiary who is determined, under title II or XVI of the Social Security Act, to have been disabled at any time during the first 60 days of continuation coverage under this section, any reference in subclause (I) or (II) to 18 months is deemed a reference to 29 months (with respect to all qualified beneficiaries), but only if the qualified beneficiary has provided notice of such determination under paragraph (6)(C) before the end of such 18 months. (ii) End of planThe date on which the employer ceases to provide any group health plan to any employee. (iii) Failure to pay premiumThe date on which coverage ceases under the plan by reason of a failure to make timely payment of any premium required under the plan with respect to the qualified beneficiary. The payment of any premium (other than any payment referred to in the last sentence of subparagraph (C)) shall be considered to be timely if made within 30 days after the date due or within such longer period as applies to or under the plan. (iv) Group health plan coverage or medicare entitlementThe date on which the qualified beneficiary first becomes, after the date of the election—(I) covered under any other group health plan (as an employee or otherwise) which does not contain any exclusion or limitation with respect to any preexisting condition of such beneficiary (other than such an exclusion or limitation which does not apply to (or is satisfied by) such beneficiary by reason of chapter 100 of this title, part 7 of subtitle B of title I of the Employee Retirement Income Security Act of 1974, or title XXVII of the Public Health Service Act), or (II) in the case of a qualified beneficiary other than a qualified beneficiary described in subsection (g)(1)(D) entitled to benefits under title XVIII of the Social Security Act. (v) Termination of extended coverage for disabilityIn the case of a qualified beneficiary who is disabled at any time during the first 60 days of continuation coverage under this section, the month that begins more than 30 days after the date of the final determination under title II or XVI of the Social Security Act that the qualified beneficiary is no longer disabled. (C) Premium requirementsThe plan may require payment of a premium for any period of continuation coverage, except that such premium—(i) shall not exceed 102 percent of the applicable premium for such period, and (ii) may, at the election of the payor, be made in monthly installments. In no event may the plan require the payment of any premium before the day which is 45 days after the day on which the qualified beneficiary made the initial election for continuation coverage. In the case of an individual described in the last sentence of subparagraph (B)(i), any reference in clause (i) of this subparagraph to “102 percent” is deemed a reference to “150 percent” for any month after the 18th month of continuation coverage described in subclause (I) or (II) of subparagraph (B)(i). (D) No requirement of insurabilityThe coverage may not be conditioned upon, or discriminate on the basis of lack of, evidence of insurability. (E) Conversion optionIn the case of a qualified beneficiary whose period of continuation coverage expires under subparagraph (B)(i), the plan must, during the 180-day period ending on such expiration date, provide to the qualified beneficiary the option of enrollment under a conversion health plan otherwise generally available under the plan. (3) Qualifying eventFor purposes of this subsection, the term “qualifying event” means, with respect to any covered employee, any of the following events which, but for the continuation coverage required under this subsection, would result in the loss of coverage of a qualified beneficiary—(A) The death of the covered employee. (B) The termination (other than by reason of such employee’s gross misconduct), or reduction of hours, of the covered employee’s employment. (C) The divorce or legal separation of the covered employee from the employee’s spouse. (D) The covered employee becoming entitled to benefits under title XVIII of the Social Security Act. (E) A dependent child ceasing to be a dependent child under the generally applicable requirements of the plan. (F) A proceeding in a case under title 11, United States Code, commencing on or after July 1, 1986, with respect to the employer from whose employment the covered employee retired at any time. In the case of an event described in subparagraph (F), a loss of coverage includes a substantial elimination of coverage with respect to a qualified beneficiary described in subsection (g)(1)(D) within one year before or after the date of commencement of the proceeding. (4) Applicable premiumFor purposes of this subsection—(A) In generalThe term “applicable premium” means, with respect to any period of continuation coverage of qualified beneficiaries, the cost to the plan for such period of the coverage for similarly situated beneficiaries with respect to whom a qualifying event has not occurred (without regard to whether such cost is paid by the employer or employee). (B) Special rule for self-insured plansTo the extent that a plan is a self-insured plan—(i) In generalExcept as provided in clause (ii), the applicable premium for any period of continuation coverage of qualified beneficiaries shall be equal to a reasonable estimate of the cost of providing coverage for such period for similarly situated beneficiaries which—(I) is determined on an actuarial basis, and (II) takes into account such factors as the Secretary may prescribe in regulations. (ii) Determination on basis of past costIf a plan administrator elects to have this clause apply, the applicable premium for any period of continuation coverage of qualified beneficiaries shall be equal to—(I) the cost to the plan for similarly situated beneficiaries for the same period occurring during the preceding determination period under subparagraph (C), adjusted by (II) the percentage increase or decrease in the implicit price deflator of the gross national product (calculated by the Department of Commerce and published in the Survey of Current Business) for the 12-month period ending on the last day of the sixth month of such preceding determination period. (iii) Clause (ii) not to apply where significant changeA plan administrator may not elect to have clause (ii) apply in any case in which there is any significant difference between the determination period and the preceding determination period, in coverage under, or in employees covered by, the plan. The determination under the preceding sentence for any determination period shall be made at the same time as the determination under subparagraph (C). (C) Determination periodThe determination of any applicable premium shall be made for a period of 12 months and shall be made before the beginning of such period. (5) ElectionFor purposes of this subsection—(A) Election periodThe term “election period” means the period which—(i) begins not later than the date on which coverage terminates under the plan by reason of a qualifying event, (ii) is of at least 60 days’ duration, and (iii) ends not earlier than 60 days after the later of—(I) the date described in clause (i), or (II) in the case of any qualified beneficiary who receives notice under paragraph (6)(D), the date of such notice. (B) Effect of election on other beneficiariesExcept as otherwise specified in an election, any election of continuation coverage by a qualified beneficiary described in subparagraph (A)(i) or (B) of subsection (g)(1) shall be deemed to include an election of continuation coverage on behalf of any other qualified beneficiary who would lose coverage under the plan by reason of the qualifying event. If there is a choice among types of coverage under the plan, each qualified beneficiary is entitled to make a separate selection among such types of coverage. (C) Temporary extension of COBRA election period for certain individuals(i) In generalIn the case of a nonelecting TAA-eligible individual and notwithstanding subparagraph (A), such individual may elect continuation coverage under this subsection during the 60-day period that begins on the first day of the month in which the individual becomes a TAA-eligible individual, but only if such election is made not later than 6 months after the date of the TAA-related loss of coverage. (ii) Commencement of coverage; no reach-backAny continuation coverage elected by a TAA-eligible individual under clause (i) shall commence at the beginning of the 60-day election period described in such paragraph and shall not include any period prior to such 60-day election period. (iii) Preexisting conditionsWith respect to an individual who elects continuation coverage pursuant to clause (i), the period—(I) beginning on the date of the TAA-related loss of coverage, and (II) ending on the first day of the 60-day election period described in clause (i), shall be disregarded for purposes of determining the 63-day periods referred to in section 9801(c)(2), section 701(c)(2) of the Employee Retirement Income Security Act of 1974, and section 2704(c)(2) of the Public Health Service Act. (iv) DefinitionsFor purposes of this subsection:(I) Nonelecting TAA-eligible individualThe term “nonelecting TAA-eligible individual” means a TAA-eligible individual who has a TAA-related loss of coverage and did not elect continuation coverage under this subsection during the TAA-related election period. (II) TAA-eligible individualThe term “TAA-eligible individual” means an eligible TAA recipient (as defined in paragraph (2) of section 35(c)) and an eligible alternative TAA recipient (as defined in paragraph (3) of such section). (III) TAA-related election periodThe term “TAA-related election period” means, with respect to a TAA-related loss of coverage, the 60-day election period under this subsection which is a direct consequence of such loss. (IV) TAA-related loss of coverageThe term “TAA-related loss of coverage” means, with respect to an individual whose separation from employment gives rise to being an TAA-eligible individual, the loss of health benefits coverage associated with such separation. (6) Notice requirementIn accordance with regulations prescribed by the Secretary—(A) The group health plan shall provide, at the time of commencement of coverage under the plan, written notice to each covered employee and spouse of the employee (if any) of the rights provided under this subsection. (B) The employer of an employee under a plan must notify the plan administrator of a qualifying event described in subparagraph (A), (B), (D), or (F) of paragraph (3) with respect to such employee within 30 days (or, in the case of a group health plan which is a multiemployer plan, such longer period of time as may be provided in the terms of the plan) of the date of the qualifying event. (C) Each covered employee or qualified beneficiary is responsible for notifying the plan administrator of the occurrence of any qualifying event described in subparagraph (C) or (E) of paragraph (3) within 60 days after the date of the qualifying event and each qualified beneficiary who is determined, under title II or XVI of the Social Security Act, to have been disabled at any time during the first 60 days of continuation coverage under this section is responsible for notifying the plan administrator of such determination within 60 days after the date of the determination and for notifying the plan administrator within 30 days of the date of any final determination under such title or titles that the qualified beneficiary is no longer disabled. (D) The plan administrator shall notify—(i) in the case of a qualifying event described in subparagraph (A), (B), (D), or (F) of paragraph (3), any qualified beneficiary with respect to such event, and (ii) in the case of a qualifying event described in subparagraph (C) or (E) of paragraph (3) where the covered employee notifies the plan administrator under subparagraph (C), any qualified beneficiary with respect to such event, of such beneficiary’s rights under this subsection. The requirements of subparagraph (B) shall be considered satisfied in the case of a multiemployer plan in connection with a qualifying event described in paragraph (3)(B) if the plan provides that the determination of the occurrence of such qualifying event will be made by the plan administrator. For purposes of subparagraph (D), any notification shall be made within 14 days (or, in the case of a group health plan which is a multiemployer plan, such longer period of time as may be provided in the terms of the plan) of the date on which the plan administrator is notified under subparagraph (B) or (C), whichever is applicable, and any such notification to an individual who is a qualified beneficiary as the spouse of the covered employee shall be treated as notification to all other qualified beneficiaries residing with such spouse at the time such notification is made. (7) Covered employeeFor purposes of this subsection, the term “covered employee” means an individual who is (or was) provided coverage under a group health plan by virtue of the performance of services by the individual for 1 or more persons maintaining the plan (including as an employee defined in section 401(c)(1)). (8) Optional extension of required periodsA group health plan shall not be treated as failing to meet the requirements of this subsection solely because the plan provides both—(A) that the period of extended coverage referred to in paragraph (2)(B) commences with the date of the loss of coverage, and (B) that the applicable notice period provided under paragraph (6)(B) commences with the date of the loss of coverage. (g) DefinitionsFor purposes of this section—(1) Qualified beneficiary(A) In generalThe term “qualified beneficiary” means, with respect to a covered employee under a group health plan, any other individual who, on the day before the qualifying event for that employee, is a beneficiary under the plan—(i) as the spouse of the covered employee, or (ii) as the dependent child of the employee. Such term shall also include a child who is born to or placed for adoption with the covered employee during the period of continuation coverage under this section. (B) Special rule for terminations and reduced employmentIn the case of a qualifying event described in subsection (f)(3)(B), the term “qualified beneficiary” includes the covered employee. (C) Exception for nonresident aliensNotwithstanding subparagraphs (A) and (B), the term “qualified beneficiary” does not include an individual whose status as a covered employee is attributable to a period in which such individual was a nonresident alien who received no earned income (within the meaning of section 911(d)(2)) from the employer which constituted income from sources within the United States (within the meaning of section 861(a)(3)). If an individual is not a qualified beneficiary pursuant to the previous sentence, a spouse or dependent child of such individual shall not be considered a qualified beneficiary by virtue of the relationship of the individual. (D) Special rule for retirees and widowsIn the case of a qualifying event described in subsection (f)(3)(F), the term “qualified beneficiary” includes a covered employee who had retired on or before the date of substantial elimination of coverage and any other individual who, on the day before such qualifying event, is a beneficiary under the plan—(i) as the spouse of the covered employee, (ii) as the dependent child of the covered employee, or (iii) as the surviving spouse of the covered employee. (2) Group health planThe term “group health plan” has the meaning given such term by section 5000(b)(1). Such term shall not include any plan substantially all of the coverage under which is for qualified long-term care services (as defined in section 7702B(c)). (3) Plan administratorThe term “plan administrator” has the meaning given the term “administrator” by section 3(16)(A) of the Employee Retirement Income Security Act of 1974. (4) CorrectionA failure of a group health plan to meet the requirements of subsection (f) with respect to any qualified beneficiary shall be treated as corrected if—(A) such failure is retroactively undone to the extent possible, and (B) the qualified beneficiary is placed in a financial position which is as good as such beneficiary would have been in had such failure not occurred. For purposes of applying subparagraph (B), the qualified beneficiary shall be treated as if he had elected the most favorable coverage in light of the expenses he incurred since the failure first occurred.

26 U.S.C. § 4980C Requirements for issuers of qualified long-term care insurance contracts

(a) General ruleThere is hereby imposed on any person failing to meet the requirements of subsection (c) or (d) a tax in the amount determined under subsection (b). (b) Amount(1) In generalThe amount of the tax imposed by subsection (a) shall be $100 per insured for each day any requirement of subsection (c) or (d) is not met with respect to each qualified long-term care insurance contract. (2) WaiverIn the case of a failure which is due to reasonable cause and not to willful neglect, the Secretary may waive part or all of the tax imposed by subsection (a) to the extent that payment of the tax would be excessive relative to the failure involved. (c) ResponsibilitiesThe requirements of this subsection are as follows:(1) Requirements of model provisions(A) Model regulationThe following requirements of the model regulation must be met:(i) Section 13 (relating to application forms and replacement coverage). (ii) Section 14 (relating to reporting requirements), except that the issuer shall also report at least annually the number of claims denied during the reporting period for each class of business (expressed as a percentage of claims denied), other than claims denied for failure to meet the waiting period or because of any applicable preexisting condition. (iii) Section 20 (relating to filing requirements for marketing). (iv) Section 21 (relating to standards for marketing), including inaccurate completion of medical histories, other than sections 21C(1) and 21C(6) thereof, except that—(I) in addition to such requirements, no person shall, in selling or offering to sell a qualified long-term care insurance contract, misrepresent a material fact; and (II) no such requirements shall include a requirement to inquire or identify whether a prospective applicant or enrollee for long-term care insurance has accident and sickness insurance. (v) Section 22 (relating to appropriateness of recommended purchase). (vi) Section 24 (relating to standard format outline of coverage). (vii) Section 25 (relating to requirement to deliver shopper’s guide). (B) Model ActThe following requirements of the model Act must be met:(i) Section 6F (relating to right to return), except that such section shall also apply to denials of applications and any refund shall be made within 30 days of the return or denial. (ii) Section 6G (relating to outline of coverage). (iii) Section 6H (relating to requirements for certificates under group plans). (iv) Section 6I (relating to policy summary). (v) Section 6J (relating to monthly reports on accelerated death benefits). (vi) Section 7 (relating to incontestability period). (C) DefinitionsFor purposes of this paragraph, the terms “model regulation” and “model Act” have the meanings given such terms by section 7702B(g)(2)(B). (2) Delivery of policyIf an application for a qualified long-term care insurance contract (or for a certificate under such a contract for a group) is approved, the issuer shall deliver to the applicant (or policyholder or certificateholder) the contract (or certificate) of insurance not later than 30 days after the date of the approval. (3) Information on denials of claimsIf a claim under a qualified long-term care insurance contract is denied, the issuer shall, within 60 days of the date of a written request by the policyholder or certificateholder (or representative)—(A) provide a written explanation of the reasons for the denial, and (B) make available all information directly relating to such denial. (d) DisclosureThe requirements of this subsection are met if the issuer of a long-term care insurance policy discloses in such policy and in the outline of coverage required under subsection (c)(1)(B)(ii) that the policy is intended to be a qualified long-term care insurance contract under section 7702B(b). (e) Qualified long-term care insurance contract definedFor purposes of this section, the term “qualified long-term care insurance contract” has the meaning given such term by section 7702B. (f) Coordination with State requirementsIf a State imposes any requirement which is more stringent than the analogous requirement imposed by this section or section 7702B(g), the requirement imposed by this section or section 7702B(g) shall be treated as met if the more stringent State requirement is met.

26 U.S.C. § 4980D Failure to meet certain group health plan requirements

(a) General ruleThere is hereby imposed a tax on any failure of a group health plan to meet the requirements of chapter 100 (relating to group health plan requirements). (b) Amount of tax(1) In generalThe amount of the tax imposed by subsection (a) on any failure shall be $100 for each day in the noncompliance period with respect to each individual to whom such failure relates. (2) Noncompliance periodFor purposes of this section, the term “noncompliance period” means, with respect to any failure, the period—(A) beginning on the date such failure first occurs, and (B) ending on the date such failure is corrected. (3) Minimum tax for noncompliance period where failure discovered after notice of examinationNotwithstanding paragraphs (1) and (2) of subsection (c)—(A) In generalIn the case of 1 or more failures with respect to an individual—(i) which are not corrected before the date a notice of examination of income tax liability is sent to the employer, and (ii) which occurred or continued during the period under examination, the amount of tax imposed by subsection (a) by reason of such failures with respect to such individual shall not be less than the lesser of $2,500 or the amount of tax which would be imposed by subsection (a) without regard to such paragraphs. (B) Higher minimum tax where violations are more than de minimisTo the extent violations for which any person is liable under subsection (e) for any year are more than de minimis, subparagraph (A) shall be applied by substituting “$15,000” for “$2,500” with respect to such person. (C) Exception for church plansThis paragraph shall not apply to any failure under a church plan (as defined in section 414(e)). (c) Limitations on amount of tax(1) Tax not to apply where failure not discovered exercising reasonable diligenceNo tax shall be imposed by subsection (a) on any failure during any period for which it is established to the satisfaction of the Secretary that the person otherwise liable for such tax did not know, and exercising reasonable diligence would not have known, that such failure existed. (2) Tax not to apply to failures corrected within certain periodsNo tax shall be imposed by subsection (a) on any failure if—(A) such failure was due to reasonable cause and not to willful neglect, and (B)(i) in the case of a plan other than a church plan (as defined in section 414(e)), such failure is corrected during the 30-day period beginning on the first date the person otherwise liable for such tax knew, or exercising reasonable diligence would have known, that such failure existed, and (ii) in the case of a church plan (as so defined), such failure is corrected before the close of the correction period (determined under the rules of section 414(e)(4)(C)). (3) Overall limitation for unintentional failuresIn the case of failures which are due to reasonable cause and not to willful neglect—(A) Single employer plans(i) In generalIn the case of failures with respect to plans other than specified multiple employer health plans, the tax imposed by subsection (a) for failures during the taxable year of the employer shall not exceed the amount equal to the lesser of—(I) 10 percent of the aggregate amount paid or incurred by the employer (or predecessor employer) during the preceding taxable year for group health plans, or (II) $500,000. (ii) Taxable years in the case of certain controlled groupsFor purposes of this subparagraph, if not all persons who are treated as a single employer for purposes of this section have the same taxable year, the taxable years taken into account shall be determined under principles similar to the principles of section 1561. (B) Specified multiple employer health plans(i) In generalIn the case of failures with respect to a specified multiple employer health plan, the tax imposed by subsection (a) for failures during the taxable year of the trust forming part of such plan shall not exceed the amount equal to the lesser of—(I) 10 percent of the amount paid or incurred by such trust during such taxable year to provide medical care (as defined in section 9832(d)(3)) directly or through insurance, reimbursement, or otherwise, or (II) $500,000. For purposes of the preceding sentence, all plans of which the same trust forms a part shall be treated as one plan. (ii) Special rule for employers required to pay taxIf an employer is assessed a tax imposed by subsection (a) by reason of a failure with respect to a specified multiple employer health plan, the limit shall be determined under subparagraph (A) (and not under this subparagraph) and as if such plan were not a specified multiple employer health plan. (4) Waiver by SecretaryIn the case of a failure which is due to reasonable cause and not to willful neglect, the Secretary may waive part or all of the tax imposed by subsection (a) to the extent that the payment of such tax would be excessive relative to the failure involved. (d) Tax not to apply to certain insured small employer plans(1) In generalIn the case of a group health plan of a small employer which provides health insurance coverage solely through a contract with a health insurance issuer, no tax shall be imposed by this section on the employer on any failure (other than a failure attributable to section 9811) which is solely because of the health insurance coverage offered by such issuer. (2) Small employer(A) In generalFor purposes of paragraph (1), the term “small employer” means, with respect to a calendar year and a plan year, an employer who employed an average of at least 2 but not more than 50 employees on business days during the preceding calendar year and who employs at least 2 employees on the first day of the plan year. For purposes of the preceding sentence, all persons treated as a single employer under subsection (b), (c), (m), or (o) of section 414 shall be treated as one employer. (B) Employers not in existence in preceding yearIn the case of an employer which was not in existence throughout the preceding calendar year, the determination of whether such employer is a small employer shall be based on the average number of employees that it is reasonably expected such employer will employ on business days in the current calendar year. (C) PredecessorsAny reference in this paragraph to an employer shall include a reference to any predecessor of such employer. (3) Health insurance coverage; health insurance issuerFor purposes of paragraph (1), the terms “health insurance coverage” and “health insurance issuer” have the respective meanings given such terms by section 9832. (e) Liability for taxThe following shall be liable for the tax imposed by subsection (a) on a failure:(1) Except as otherwise provided in this subsection, the employer. (2) In the case of a multiemployer plan, the plan. (3) In the case of a failure under section 9803 (relating to guaranteed renewability) with respect to a plan described in subsection (f)(2)(B), the plan. (f) DefinitionsFor purposes of this section—(1) Group health planThe term “group health plan” has the meaning given such term by section 9832(a). (2) Specified multiple employer health planThe term “specified multiple employer health plan” means a group health plan which is—(A) any multiemployer plan, or (B) any multiple employer welfare arrangement (as defined in section 3(40) of the Employee Retirement Income Security Act of 1974, as in effect on the date of the enactment of this section). (3) CorrectionA failure of a group health plan shall be treated as corrected if—(A) such failure is retroactively undone to the extent possible, and (B) the person to whom the failure relates is placed in a financial position which is as good as such person would have been in had such failure not occurred. (g) Application to requirements imposed on certain entities providing pharmacy benefit management servicesIn the case of any requirement under section 9826 that applies with respect to an entity providing pharmacy benefit management services on behalf of a group health plan, any reference in this section to such group health plan (and the reference in subsection (e)(1) to the employer) shall be treated as including a reference to such entity.

26 U.S.C. § 4980E Failure of employer to make comparable Archer MSA contributions

(a) General ruleIn the case of an employer who makes a contribution to the Archer MSA of any employee with respect to coverage under a high deductible health plan of the employer during a calendar year, there is hereby imposed a tax on the failure of such employer to meet the requirements of subsection (d) for such calendar year. (b) Amount of taxThe amount of the tax imposed by subsection (a) on any failure for any calendar year is the amount equal to 35 percent of the aggregate amount contributed by the employer to Archer MSAs of employees for taxable years of such employees ending with or within such calendar year. (c) Waiver by SecretaryIn the case of a failure which is due to reasonable cause and not to willful neglect, the Secretary may waive part or all of the tax imposed by subsection (a) to the extent that the payment of such tax would be excessive relative to the failure involved. (d) Employer required to make comparable MSA contributions for all participating employees(1) In generalAn employer meets the requirements of this subsection for any calendar year if the employer makes available comparable contributions to the Archer MSAs of all comparable participating employees for each coverage period during such calendar year. (2) Comparable contributions(A) In generalFor purposes of paragraph (1), the term “comparable contributions” means contributions—(i) which are the same amount, or (ii) which are the same percentage of the annual deductible limit under the high deductible health plan covering the employees. (B) Part-year employeesIn the case of an employee who is employed by the employer for only a portion of the calendar year, a contribution to the Archer MSA of such employee shall be treated as comparable if it is an amount which bears the same ratio to the comparable amount (determined without regard to this subparagraph) as such portion bears to the entire calendar year. (3) Comparable participating employeesFor purposes of paragraph (1), the term “comparable participating employees” means all employees—(A) who are eligible individuals covered under any high deductible health plan of the employer, and (B) who have the same category of coverage. For purposes of subparagraph (B), the categories of coverage are self-only and family coverage. (4) Part-time employees(A) In generalParagraph (3) shall be applied separately with respect to part-time employees and other employees. (B) Part-time employeeFor purposes of subparagraph (A), the term “part-time employee” means any employee who is customarily employed for fewer than 30 hours per week. (e) Controlled groupsFor purposes of this section, all persons treated as a single employer under subsection (b), (c), (m), or (o) of section 414 shall be treated as 1 employer. (f) DefinitionsTerms used in this section which are also used in section 220 have the respective meanings given such terms in section 220.

26 U.S.C. § 4980F Failure of applicable plans reducing benefit accruals to satisfy notice requirements

(a) Imposition of taxThere is hereby imposed a tax on the failure of any applicable pension plan to meet the requirements of subsection (e) with respect to any applicable individual. (b) Amount of tax(1) In generalThe amount of the tax imposed by subsection (a) on any failure with respect to any applicable individual shall be $100 for each day in the noncompliance period with respect to such failure. (2) Noncompliance periodFor purposes of this section, the term “noncompliance period” means, with respect to any failure, the period beginning on the date the failure first occurs and ending on the date the notice to which the failure relates is provided or the failure is otherwise corrected. (c) Limitations on amount of tax(1) Tax not to apply where failure not discovered and reasonable diligence exercisedNo tax shall be imposed by subsection (a) on any failure during any period for which it is established to the satisfaction of the Secretary that any person subject to liability for the tax under subsection (d) did not know that the failure existed and exercised reasonable diligence to meet the requirements of subsection (e). (2) Tax not to apply to failures corrected within 30 daysNo tax shall be imposed by subsection (a) on any failure if—(A) any person subject to liability for the tax under subsection (d) exercised reasonable diligence to meet the requirements of subsection (e), and (B) such person provides the notice described in subsection (e) during the 30-day period beginning on the first date such person knew, or exercising reasonable diligence would have known, that such failure existed. (3) Overall limitation for unintentional failures(A) In generalIf the person subject to liability for tax under subsection (d) exercised reasonable diligence to meet the requirements of subsection (e), the tax imposed by subsection (a) for failures during the taxable year of the employer (or, in the case of a multiemployer plan, the taxable year of the trust forming part of the plan) shall not exceed $500,000. For purposes of the preceding sentence, all multiemployer plans of which the same trust forms a part shall be treated as 1 plan. (B) Taxable years in the case of certain controlled groupsFor purposes of this paragraph, if all persons who are treated as a single employer for purposes of this section do not have the same taxable year, the taxable years taken into account shall be determined under principles similar to the principles of section 1561. (4) Waiver by SecretaryIn the case of a failure which is due to reasonable cause and not to willful neglect, the Secretary may waive part or all of the tax imposed by subsection (a) to the extent that the payment of such tax would be excessive or otherwise inequitable relative to the failure involved. (d) Liability for taxThe following shall be liable for the tax imposed by subsection (a):(1) In the case of a plan other than a multiemployer plan, the employer. (2) In the case of a multiemployer plan, the plan. (e) Notice requirements for plans significantly reducing benefit accruals(1) In generalIf an applicable pension plan is amended to provide for a significant reduction in the rate of future benefit accrual, the plan administrator shall provide the notice described in paragraph (2) to each applicable individual (and to each employee organization representing applicable individuals) and to each employer who has an obligation to contribute to the plan. (2) NoticeThe notice required by paragraph (1) shall be written in a manner calculated to be understood by the average plan participant and shall provide sufficient information (as determined in accordance with regulations prescribed by the Secretary) to allow applicable individuals to understand the effect of the plan amendment. The Secretary may provide a simplified form of notice for, or exempt from any notice requirement, a plan—(A) which has fewer than 100 participants who have accrued a benefit under the plan, or (B) which offers participants the option to choose between the new benefit formula and the old benefit formula. (3) Timing of noticeExcept as provided in regulations, the notice required by paragraph (1) shall be provided within a reasonable time before the effective date of the plan amendment. (4) DesigneesAny notice under paragraph (1) may be provided to a person designated, in writing, by the person to which it would otherwise be provided. (5) Notice before adoption of amendmentA plan shall not be treated as failing to meet the requirements of paragraph (1) merely because notice is provided before the adoption of the plan amendment if no material modification of the amendment occurs before the amendment is adopted. (f) Definitions and special rulesFor purposes of this section—(1) Applicable individualThe term “applicable individual” means, with respect to any plan amendment—(A) each participant in the plan, and (B) any beneficiary who is an alternate payee (within the meaning of section 414(p)(8)) under an applicable qualified domestic relations order (within the meaning of section 414(p)(1)(A)), whose rate of future benefit accrual under the plan may reasonably be expected to be significantly reduced by such plan amendment. (2) Applicable pension planThe term “applicable pension plan” means—(A) any defined benefit plan described in section 401(a) which includes a trust exempt from tax under section 501(a), or (B) an individual account plan which is subject to the funding standards of section 412. Such term shall not include a governmental plan (within the meaning of section 414(d)) or a church plan (within the meaning of section 414(e)) with respect to which the election provided by section 410(d) has not been made. (3) Early retirementA plan amendment which eliminates or reduces any early retirement benefit or retirement-type subsidy (within the meaning of section 411(d)(6)(B)(i)) shall be treated as having the effect of reducing the rate of future benefit accrual. (g) New technologiesThe Secretary may by regulations allow any notice under subsection (e) to be provided by using new technologies.

26 U.S.C. § 4980G Failure of employer to make comparable health savings account contributions

(a) General ruleIn the case of an employer who makes a contribution to the health savings account of any employee during a calendar year, there is hereby imposed a tax on the failure of such employer to meet the requirements of subsection (b) for such calendar year. (b) Rules and requirementsRules and requirements similar to the rules and requirements of section 4980E shall apply for purposes of this section. (c) RegulationsThe Secretary shall issue regulations to carry out the purposes of this section, including regulations providing special rules for employers who make contributions to Archer MSAs and health savings accounts during the calendar year. (d) ExceptionFor purposes of applying section 4980E to a contribution to a health savings account of an employee who is not a highly compensated employee (as defined in section 414(q)), highly compensated employees shall not be treated as comparable participating employees.

26 U.S.C. § 4980H Shared responsibility for employers regarding health coverage

(a) Large employers not offering health coverageIf—(1) any applicable large employer fails to offer to its full-time employees (and their dependents) the opportunity to enroll in minimum essential coverage under an eligible employer-sponsored plan (as defined in section 5000A(f)(2)) for any month, and (2) at least one full-time employee of the applicable large employer has been certified to the employer under section 1411 of the Patient Protection and Affordable Care Act as having enrolled for such month in a qualified health plan with respect to which an applicable premium tax credit or cost-sharing reduction is allowed or paid with respect to the employee, then there is hereby imposed on the employer an assessable payment equal to the product of the applicable payment amount and the number of individuals employed by the employer as full-time employees during such month. (b) Large employers offering coverage with employees who qualify for premium tax credits or cost-sharing reductions(1) In generalIf—(A) an applicable large employer offers to its full-time employees (and their dependents) the opportunity to enroll in minimum essential coverage under an eligible employer-sponsored plan (as defined in section 5000A(f)(2)) for any month, and (B) 1 or more full-time employees of the applicable large employer has been certified to the employer under section 1411 of the Patient Protection and Affordable Care Act as having enrolled for such month in a qualified health plan with respect to which an applicable premium tax credit or cost-sharing reduction is allowed or paid with respect to the employee, then there is hereby imposed on the employer an assessable payment equal to the product of the number of full-time employees of the applicable large employer described in subparagraph (B) for such month and an amount equal to 1⁄12 of $3,000. (2) Overall limitationThe aggregate amount of tax determined under paragraph (1) with respect to all employees of an applicable large employer for any month shall not exceed the product of the applicable payment amount and the number of individuals employed by the employer as full-time employees during such month. (c) Definitions and special rulesFor purposes of this section—(1) Applicable payment amountThe term “applicable payment amount” means, with respect to any month, 1⁄12 of $2,000. (2) Applicable large employer(A) In generalThe term “applicable large employer” means, with respect to a calendar year, an employer who employed an average of at least 50 full-time employees on business days during the preceding calendar year. (B) Exemption for certain employers(i) In generalAn employer shall not be considered to employ more than 50 full-time employees if—(I) the employer’s workforce exceeds 50 full-time employees for 120 days or fewer during the calendar year, and (II) the employees in excess of 50 employed during such 120-day period were seasonal workers. (ii) Definition of seasonal workersThe term “seasonal worker” means a worker who performs labor or services on a seasonal basis as defined by the Secretary of Labor, including workers covered by section 500.20(s)(1) of title 29, Code of Federal Regulations and retail workers employed exclusively during holiday seasons. (C) Rules for determining employer sizeFor purposes of this paragraph—(i) Application of aggregation rule for employersAll persons treated as a single employer under subsection (b), (c), (m), or (o) of section 414 of the Internal Revenue Code of 1986 shall be treated as 1 employer. (ii) Employers not in existence in preceding yearIn the case of an employer which was not in existence throughout the preceding calendar year, the determination of whether such employer is an applicable large employer shall be based on the average number of employees that it is reasonably expected such employer will employ on business days in the current calendar year. (iii) PredecessorsAny reference in this subsection to an employer shall include a reference to any predecessor of such employer. (D) Application of employer size to assessable penalties(i) In generalThe number of individuals employed by an applicable large employer as full-time employees during any month shall be reduced by 30 solely for purposes of calculating—(I) the assessable payment under subsection (a), or (II) the overall limitation under subsection (b)(2). (ii) AggregationIn the case of persons treated as 1 employer under subparagraph (C)(i), only 1 reduction under subclause (I) or (II) 11 So in original. Probably means subclause (I) or (II) of clause (i). shall be allowed with respect to such persons and such reduction shall be allocated among such persons ratably on the basis of the number of full-time employees employed by each such person. (E) Full-time equivalents treated as full-time employeesSolely for purposes of determining whether an employer is an applicable large employer under this paragraph, an employer shall, in addition to the number of full-time employees for any month otherwise determined, include for such month a number of full-time employees determined by dividing the aggregate number of hours of service of employees who are not full-time employees for the month by 120. (F) Exemption for health coverage under TRICARE or the Department of Veterans AffairsSolely for purposes of determining whether an employer is an applicable large employer under this paragraph for any month, an individual shall not be taken into account as an employee for such month if such individual has medical coverage for such month under—(i) chapter 55 of title 10, United States Code, including coverage under the TRICARE program, or (ii) under a health care program under chapter 17 or 18 of title 38, United States Code, as determined by the Secretary of Veterans Affairs, in coordination with the Secretary of Health and Human Services and the Secretary. (3) Applicable premium tax credit and cost-sharing reductionThe term “applicable premium tax credit and cost-sharing reduction” means—(A) any premium tax credit allowed under section 36B, (B) any cost-sharing reduction under section 1402 of the Patient Protection and Affordable Care Act, and (C) any advance payment of such credit or reduction under section 1412 of such Act. (4) Full-time employee(A) In generalThe term “full-time employee” means, with respect to any month, an employee who is employed on average at least 30 hours of service per week. (B) Hours of serviceThe Secretary, in consultation with the Secretary of Labor, shall prescribe such regulations, rules, and guidance as may be necessary to determine the hours of service of an employee, including rules for the application of this paragraph to employees who are not compensated on an hourly basis. (5) Inflation adjustment(A) In generalIn the case of any calendar year after 2014, each of the dollar amounts in subsection (b) and paragraph (1) shall be increased by an amount equal to the product of—(i) such dollar amount, and (ii) the premium adjustment percentage (as defined in section 1302(c)(4) of the Patient Protection and Affordable Care Act) for the calendar year. (B) RoundingIf the amount of any increase under subparagraph (A) is not a multiple of $10, such increase shall be rounded to the next lowest multiple of $10. (6) Other definitionsAny term used in this section which is also used in the Patient Protection and Affordable Care Act shall have the same meaning as when used in such Act. (7) Tax nondeductibleFor denial of deduction for the tax imposed by this section, see section 275(a)(6). (d) Administration and procedure(1) In generalAny assessable payment provided by this section shall be paid upon notice and demand by the Secretary, and shall be assessed and collected in the same manner as an assessable penalty under subchapter B of chapter 68. (2) Time for paymentThe Secretary may provide for the payment of any assessable payment provided by this section on an annual, monthly, or other periodic basis as the Secretary may prescribe. (3) Coordination with credits, etc.The Secretary shall prescribe rules, regulations, or guidance for the repayment of any assessable payment (including interest) if such payment is based on the allowance or payment of an applicable premium tax credit or cost-sharing reduction with respect to an employee, such allowance or payment is subsequently disallowed, and the assessable payment would not have been required to be made but for such allowance or payment. (4) Time for responseThe Secretary shall allow an applicable large employer at least 90 days from the date of the first letter which informs the employer of a proposed assessment of the employer shared responsibility payment under this section to respond to the proposed assessment before taking any further action with respect to such proposed assessment.